In studying the relationship between wage inequality and centralization in collective bargaining, we distinguish central from local systems of wage determination by assuming that a central union takes the employment effects of negotiated wages into account, whereas unions disregard these effects in decentralized systems. Two different sources of wage differentials are studied separately: (i) heterogeneous workers with different skills and (ii) heterogeneous firms with varying levels of economic rent per employee. With respect to skill levels, the impact of centralization is ambiguous, whereas inter-firm wage differentials are likely to be lower in corporatist systems.
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Barth et al. (1995) studied this question.