Industrial relations reform, firm-level bargaining and nominal wage floors

Decentralised bargaining is an important wage setting mechanism that promotes wage flexibility which in turn determines how earnings and employment are affected by economic shocks. We investigate the impact of the 2011 industrial relations reform in Greece that allowed firms with less than 50 employees to participate in firm-level bargaining. Matching administrative contractual data with longitudinal firm-level data we identify treated and nontreated firms. We find that during the first post-reform year, treated firms with less than 50 employees experienced a 4.8 percent increase in firm-level bargaining and a 12 percent drop in wage floors relative to non-treated firms. We also document a positive employment impact.