Introduction

The analysis so far has left open a great many questions. In chapter 2 we sketched the potential role of higher-level organizations in dealing with the effects of aggregate shocks for nominal contracts. In other chapters we documented the empirical relevance of these institutions. In those countries where they play a role insiders were less able to extract a part of the surplus. However, we never answered obvious questions as to why these organizations would behave optimally for the contracting parties, why contracting parties would be prepared to accept the adjustments of the nominal contracts announced by the corporatist organizations and how corporatist organizations collect their membership dues without running into free-rider problems. In this chapter we will try to answer these questions by digging more deeply into the working of the corporatist system.

As it is impossible to get a detailed understanding without focusing on a single country, most of the material discussed in this chapter refers to the Netherlands. From a theoretical point of view, the choice of this country is arbitrary. The main motivation for our choice is that the information on the Netherlands was easily available to us. This refers in particular to more detailed institutional evidence on ‘how deals are made’. The evidence can only be appreciated when one has a proper understanding of the context. We do not think that the Netherlands can serve as a prototype for all other countries with more or less corporatist wage setting.