Trade Exposure and the Decline in Collective Bargaining: Evidence From Germany
We analyze the effect of the increase in trade exposure induced by the rise of China andthe transformation of Eastern Europe on collective bargaining coverage of German plants inthe period 1996–2008. We exploit cross-industry variation in trade exposure and use tradeflows of other high-income countries as instruments for German trade exposure. We findthat increased import exposure has led to an increase in the probability of German plantsleaving industry-wide bargaining agreements, accounting for about one fifth of the overalldecline in the German manufacturing sector. The effect is most pronounced for small andmedium-sized plants.