employees.<sup>7</sup> In order to make the results representative of the total population, the cross-country statistics presented in the following sections use employment adjusted weights. For each firm or observation these weights indicate the number of employees each observation represents in the population.<sup>8</sup> These weights are calculated as employment in the population divided by the number of firms (in each stratum), in the final sample.<sup>9</sup> A detailed description of the distribution of the sample by country, sector and size along with a description of the construction of employment based weights can be found in the online appendix to Babecký et al (2012).

# **_3.2 Institutional Background of Participating Countries_**

As discussed in detail in Du Caju et al. (2009), the EU-15 member states in our sample belong to a group of countries with relatively strictly regulated systems of wage bargaining, characterised by the existence of extension procedures, a high level of collective agreement coverage, and a dominance of sectoral (and to a lesser extent firm-level) collective agreements. On the other hand, in most of the CEE countries the importance of unions in wage bargaining systems is quite limited. This group includes countries which tend to have very low trade union densities, low levels of collective agreement coverage, and decentralised wage bargaining frameworks.<sup>10</sup> Since differences in the organization of labour market institutions may affect wage-setting practices we will differentiate between the EU-15 and CEE countries throughout the paper.

The survey included three questions related to the collective bargaining of wages. Managers were asked if a collective wage agreement applied to their firm and, if they answered yes, they were further asked whether it was a firm-level agreement or a binding agreement that was negotiated at a level outside the firm, such as the national or sectoral level. In addition, the survey obtained data on the proportion of workers in the firm covered by any kind of collective wage agreement, internal or external. The information is summarised in Table 1. Our findings are qualitatively consistent with those of Du Caju et al. (2009) and point to the sharp difference between the EU-15 and CEE

> 7 The response rate varied across countries ranging from 12% in Lithuania to 73% in Poland (for more details see Appendix 1 in Babecky et al. 2009). On average, the response rates are comparable to those of similar surveys like Campbell and Kamlani, (1997); Agell and Lundborg, (2003); or Franz and Pfeiffer, (2006).

> 8 The employment adjusted weights account for the unequal probabilities of firms receiving and responding to the questionnaire across strata and also for the average firm size (measured as the number of employees) in the population in each stratum.

> 9 For most of the cases the stratification is based on sector and firm size, while some countries also used region as an additional stratum.

> 10 The EU-15 countries are: Austria, Belgium, Spain, France, Ireland, Italy, the Netherlands and Portugal. The CEE countries included are: the Czech Republic, Estonia, Hungary, Lithuania, Slovenia and Poland.

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