BARGAINING, COMPENSATING WAGE DIFFERENTIALS, AND DUALISM OF THE LABOR-MARKET - THEORY AND EVIDENCE FOR FRANCE

The theory of compensating differentials predicts a negative relations hip between wages and good working conditions, while the theory of seg mentation predicts a positive one. Combining the hedonic wage model an d the wages-employment collective bargaining model, we show the releva nce of a further factor: a union power effect. Then we test the validi ty of this effect with French cross-section data. Empirical results co nfirm the predictions of the model, that is, the coexistence of a nega tive relationship between wages and good working conditions for the wh ole sample (market effect) and a positive relationship in highly union ized sectors (union power effect).