ABSTRACT
Wage formation processes are embedded in the institutions that regulate the labour market. They are influenced by market developments on the one hand and mediated by institutional factors on the other. Market factors put pressure on wage bargainers to take into account the effects on the economy of changes in wages. External shocks, rising prices and high levels of unemployment alter the conditions under which wages are formed. Institutional factors are particularly strong in the labour market since wages determine the well-being of the majority of citizens. Concerns about social justice and the distribution of income are thereby integrally linked to the processes of wage setting. Since collective bargaining is carried out by wage bargaining institutions, the design of these institutions usually has a strong impact on the conduct of bargaining.
