Trade Exposure and the Decline in Collective Bargaining: Evidence From Germany

ABSTRACT We analyze how rising trade exposure from China and Eastern Europe affected collective bargaining coverage in German plants from 1996 to 2008. Using cross‐industry variation in trade exposure and instrumenting with trade flows from other high‐income countries, we find that higher import exposure increased the likelihood that plants exited industry‐wide bargaining agreements, while export exposure had no average effect. Overall, rising trade exposure explains about 13% of the decline in industry‐wide bargaining coverage. The import effect is stronger for small and medium‐sized plants, while export opportunities help stabilize participation among large plants and those with works councils.