Collective Agreement Effect Definition
Most trade unions in developing countries are weak. Many are more engaged in political activities than in collective bargaining. But a sufficient number of unions in developing countries conduct collective bargaining to enable researchers to study what unions do with wages in the Lewis tradition (1963, 1986) and what they do with non-wage outcomes in the tradition of Freeman and Medoff (1984). For Brazil, Arbache estimates a union premium of around 5 to 7 percent in manufacturing, but, contrary to most studies, it also finds greater wage dispersion among unionized workers than among non-unionized workers. Menezes-Filho, Zylberstajn, Chahad and Pazello (2005) estimate that union density in Brazilian production enterprises is linked to a union pay effect of 12% and that unionized enterprises have lower productivity and profitability, that union enterprises that have set up profit-making schemes show considerable productivity and profit gains. Studies for other Latin American countries, based on small surveys, show that unions are linked to lower productivity or lower profits. The study for Peru shows a decline in profits, but comparable productivity in both unionized and non-union enterprises, which means that unions must have obtained higher wages. The Guatemala study has 10% lower productivity in unionized coffee plantations in a sample of 37 large plantations, but finds no difference between the union and the non-union in a fixed effects analysis that examines productivity changes in the five plantations that changed union status during the period. An extremely important aspect is the limitation of the effectiveness of collective agreements in relation to the individual employment contract. .