**Table 7: The relationship between the margins of labour cost adjustment, wage rigidities and unionisation**

|D|ependent var<br>Some<br>margin|iable equals<br>Reduce<br>bonuses|one if the r<br>Reduce<br>benefits|espective m<br>Change<br>shifts|argin is used<br>Slow<br>promotions|Cheaper<br>hires|Early<br>retirement|
|---|---|---|---|---|---|---|---|
|_Spec_|_ification 1: n_|_ominal wag_|_e rigidity an_|_d strict (for_|_mal) indexatio_|_n_||
|Nominal wage rigidity<br>Strict Indexation<br>Only outside agreement<br>Only firm agreement<br>Firm and outside<br>agreement<br>Observations|0.227***<br>(0.000)<br>-0.039*<br>(0.057)<br>0.057***<br>(0.008)<br>0.077***<br>(0.002)<br>0.075***<br>(0.005)<br>7302|0.126***<br>(0.000)<br>-0.033**<br>(0.038)<br>0.028<br>(0.110)<br>0.012<br>(0.497)<br>0.032<br>(0.139)<br>7302|0.062***<br>(0.000)<br>-0.019*<br>(0.086)<br>0.027**<br>(0.042)<br>0.036***<br>(0.008)<br>0.032*<br>(0.068)<br>7302|0.074***<br>(0.000)<br>-0.041**<br>(0.020)<br>0.049**<br>(0.011)<br>0.020<br>(0.278)<br>0.093***<br>(0.002)<br>5579|0.153***<br>(0.000)<br>-0.053***<br>(0.000)<br>-0.022<br>(0.142)<br>0.018<br>(0.277)<br>-0.009<br>(0.637)<br>7006|0.110***<br>(0.000)<br>0.000<br>(0.980)<br>0.013<br>(0.472)<br>0.037*<br>(0.079)<br>0.013<br>(0.575)<br>7006|0.039***<br>(0.007)<br>0.002<br>(0.882)<br>0.044**<br>(0.021)<br>0.075***<br>(0.000)<br>0.104***<br>(0.000)<br>5870|
|_Specification_|_2: nominal w_|_age rigidity_|_and extend_|_ed (formal a_|_nd informal) _|_indexation_||
|Nominal wage rigidity<br>Formal/informal<br>indexation|0.230***<br>(0.000)<br>0.004<br>(0.740)|0.131***<br>(0.000)<br>-0.001<br>(0.897)|0.063***<br>(0.000)<br>-0.008<br>(0.258)|0.077***<br>(0.000)<br>-0.007<br>(0.518)|0.159***<br>(0.000)<br>-0.010<br>(0.276)|0.112***<br>(0.000)<br>0.008<br>(0.486)|0.038***<br>(0.008)<br>-0.002<br>(0.833)|
|Only outside agreement|0.057***<br>(0.009)|0.028<br>(0.116)|0.026**<br>(0.045)|0.049**<br>(0.012)|-0.023<br>(0.137)|0.013<br>(0.477)|0.044**<br>(0.021)|
|Only firm agreement<br>Firm and outside<br>agreement|0.075***<br>(0.002)<br>0.074***<br>(0.006)|0.011<br>(0.525)<br>0.032<br>(0.150)|0.036***<br>(0.008)<br>0.032*<br>(0.070)|0.019<br>(0.302)<br>0.091***<br>(0.002)|0.016<br>(0.332)<br>-0.010<br>(0.597)|0.037*<br>(0.082)<br>0.013<br>(0.561)|0.076***<br>(0.000)<br>0.105***<br>(0.000)|
|Observations|7308|7308|7308|5581|7012|7012|5876|

Notes: Robust p values in parentheses, *** p<0.01, ** p<0.05, * p<0.1. Marginal effects are reported. Regressions include country and sector fixed effects, three indicators of labour force characteristics, three firm size dummies, the share of temporary contracts and labour costs in total costs and three dummies of perceived competition.

All the regression specifications presented above control for the impact of unions including our usual set of dummy variables for the different types of predominant wage bargaining regimes. The marginal effects of the union activity dummies remain significant, and are not substantially altered by the inclusion of the indicators of nominal and real rigidity. Parallel to this result, we have experimented excluding the dummies for unions from the regressions and the marginal effect of nominal rigidity and indexation we obtain are very similar.<sup>9</sup> Similarly, there are no significant changes when we either include or exclude in alternative specifications the indicator of union coverage. This suggests that, contrary to our initial expectations, the indicators of wage rigidity are capturing constraints at the time of wage

> 9 Detailed results are presented in Tables A7 and A8 in Appendix 5.

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