Firms' Rents, Workers' Bargaining Power and the Union Wage Premium

This article identifies the wage premium associated with firm‐level union recognition in France. An average premium of 2% is found despite the fact that most workers are already covered by industry‐level agreements. To explore the origin of the premium, I construct a simple bargaining model from which I derive three predictions, which are tested empirically using matched employer–employee data. The main prediction is that if intra‐firm bargaining is behind the union wage premium, the latter increases with the amount of quasi‐rents available in the firms that unions organise. This prediction is validated empirically when firms’ market shares are used as a proxy for their rents.