Global value chains and wages under different wage setting mechanisms

Abstract

This study examines whether, and how, differences in wage bargaining schemes shape the relationship between global value chains (GVCs) and the wages of workers while considering both GVC participation and position in GVC. Our dataset is derived from the European Structure of Earnings Survey (SES), containing employee–employer data from 18 European countries, merged with sectoral data from the World Input-Output Database (WIOD). The results of an augmented Mincer-type regression show that under national and industry wage bargaining schemes, greater participation in GVCs is associated with lower wages, whereas no adverse impact from GVCs is observed for workers under enterprise bargaining schemes. Finally, numerous extensions and instrumental variable estimations confirm that the type of collective pay agreement may alter the response of wages to both GVC participation and position.