Contractual wages and the wage cushion under different bargaining settings

Ana Rute Cardoso, Pedro Portugal

Research output: Contribution to journalArticlepeer-review

68 Citations (Scopus)


How does a typically European bargaining system, with collective bargaining and national minimum wage, coexist with low unemployment and high wage flexibility? A unique data set on workers, firms, and collective bargaining contracts in Portugal is used to analyze the determinants of both the contractual wage and the wage cushion (difference between contractual and actual wages). The results indicate that the wage cushion stretches the returns to worker and firm attributes, whereas it shrinks the returns to union power. Therefore, firm-specific arrangements partly offset collective bargaining, granting firms certain freedom when setting wages. Contractual wages reflect trade unions' egalitarian policy.

Original languageEnglish
Pages (from-to)875-902
Number of pages28
JournalJournal Of Labor Economics
Issue number4
Publication statusPublished - Oct 2005


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