The endogenous national minimum wage institution Emmanuel Petrakis a , Minas Vlassis b, * ,1 a Department of Economics, University of Crete, 74100 Rethymnon, Greece and IMOP b Department of Economics, University of Ioannina, 45110 Ioannina, Greece and IMOP Received 7 January 2002; accepted 15 October 2003 Available online 19 July 2005 Abstract This paper offers reasoning for the endogenous sustainability of the National Minimum Wage Institution (NMWI). In an economy with asymmetries in productivity among unionized firms, high-tech firms may often opt for minimum wage agreements covering all unionized workers, in order to raise the relative costs of their rival low-tech firms. Their workersÕ unions as well as the unions of workers in low-tech firms share this interest, provided that the degree of product substitutability is not too low and the wage agreement is not too high. Hence, since economy-wide minimum wage agreements prove to be compatible with the interest of all unions and high-tech firms, the NMWI can be sustained in equilibrium under politically con- venient circumstances. Ó 2005 Elsevier Inc. All rights reserved. JEL classification: J50; J31; L13 Keywords: Bargaining institutions; Minimum wage; Majority coalition 0164-0704/$ - see front matter Ó 2005 Elsevier Inc. All rights reserved. doi:10.1016/j.jmacro.2003.10.004 * Corresponding author. Tel.: +2831077396. E-mail addresses: mvlassis@cc.uoi.gr, mvlassis@econ.soc.uoc.gr (M. Vlassis). 1 We have benefited from comments and suggestions made during the presentations of earlier versions of this paper in the 3rd Conference on Macro-economic Analysis and International Finance, Rethymnon, Crete, May 1999, and in the EALE Conference, Juvaskula, Finland, September 2001. We are particularly indebted to an anonymous referee, whose comments and suggestions have significantly contributed to bringing the paper into its current form. Of course, all remaining errors are ours. Journal of Macroeconomics 27 (2005) 747–762 www.elsevier.com/locate/jmacro