Wage Bargaining, Inventories, and Union Legislation

This paper analyses a strategic bargaining game where the firm may or maynot be able to sell out of its inventory of finished goods during astrike. Firms and the union are both risk neutral and have the same discountrate. It is shown that the wage equilibrium corresponds to the axiomaticNash bargaining solution where the threatpoints are the agents' payoffsshould bargaining continue indefinitely. We use the 1980 and 1982 EmploymentActs to test this theory, interpreting that legislation change as changingthe firm's threatpoint but not its bargaining power. This allows us toidentify the value of the firm's threatpoint post-1982. Formal testssupport the theory. Also consistent with the theory, it is found that unionwages decrease with inventories after 1982, but not before, and that theunion wage gap is smaller after 1982.     

Union Wage Effects and the Probability of Union Membership*

This paper uses Lee's (1978) model to determine the wage gains associated with trade union membership and the reasons individuals join trade unions in Australia The data are derived from the 1984 Australian National Social Science Survey. A major conclusion is that unions secure a 17.22 per cent wage gain for their members, other things the same. This expected wage premium is shown to have an important positive impact upon the union membership decision. The welfare loss associated with the union wage premium is argued to be relatively minor about one half of one per cent of gross domestic product     

Insider Bargaining Power, Starting Wages and Involuntary Unemployment

Recent studies of wage bargaining and unemployment have emphasized the distinction between insiders and outsiders, and that unions act in the interest of insiders. Yet it is typically assumed that insiders and recently hired outsiders are paid the same wage. We consider a model where the starting wage may differ from the insider wage, but incentive constraints associated with turnover affect the form of the contract. We examine under what conditions the starting wage is linked to the insider wage so that increased bargaining power of insiders raises the starting wage and reduces the hiring of outsiders.
JEL classification : J 23; J 31; J 33     

Employment and Wage Bargaining in an Open Monetary Union

This paper studies alternative patterns of wage bargaining in an open two-country monetary union. Wages are fixed by trade unions for two periods, either at the national or at the monetary union level. It is shown that the best solution with regard to unemployment depends on the nature of externalities and dynamic strategic interactions between the monetary union's countries; namely on the degree of openness of the monetary union, and the differentiation index between national goods.     

Macroeconomic Performance and Wage Bargaining in a Monetary Union

Building on a micro-founded model of a two-region monetary union, this paperanalyses the macroeconomic impact of institutional reforms in labour marketsand central banking that may occur as a result of monetary unification. Thepaper shows that monopoly distortions in the labour market are a key factorin evaluating the effects of central bank's conservativeness and wagecentralisation on inflation and unemployment. Wage restraint is favoured ina highly decentralised wage bargaining setup as well as under a liberalcentral bank, provided competition is high in the labour market.     

Union Wage Strategies and International Trade

We characterise a full set of possible international trade regimes for different combinations of wages in a two-country model of oligopoly with a homogeneous product. We show that the nature of any equilibrium trade will be either inter-industry (one-way) or intra-industry (two-way) depending on (endogenous) union choices between high and low-wage strategies. We show that intra-industry trade is the more likely the lower are trade costs, and that under intra-industry trade, falling trade costs lead monopoly unions to set higher wages, but the opposite obtains under inter-industry trade.     

Social Security and Old Age Unemployment Risk with Efficient Wage Bargaining

I analyze a life‐cycle economy with old age productivity risk where wages, employment, and severance payments are set through efficient bargaining between risk averse unions and risk neutral firms. Allocations with limited union membership are second‐best inefficient as they generate too little labor supply in young age, too much consumption before retirement, too little employment of older workers (early retirement), and too little insurance against old age unemployment. Providing public transfers to early retirees (disability benefits or early pensions) might help to increase the degree of risk sharing at the cost of lower old age employment. Depending on whether absolute risk aversion is increasing or decreasing in consumption, these policies might or might not produce efficiency gains at equilibrium.     

Equilibrium Unemployment Rate and Customs Union

This paper utilizes the macroeconomics concept of the equilibrium rate of unemployment for theorems on free trade and the formation of customs union. The notion of an equilibrium rate of unemployment appears in the literature on labour, macroeconomics, business cycles and trade theory. Such an equilibrium rate can be derived in a number of ways, for example, by introducing labor–leisure choice in the utility functions of the workers; a labor turnover model and/or by introducing shirking. We extend the two sector-two factor Heckscher–Ohlin–Samuelson model for a small open economy by relaxing the assumption of inelastic labor supply. Specifically, we consider the classical labor supply function obtained from the representative consumer's utility maximisation problem. This consideration allows for the existence of unemployment and we analyse the effects trade policies have on the equilibrium unemployment rate. Given the movement towards free trade (either via the implementation of GATT and/or formation of customs union) it is important to examine its implications for the equilibrium rate of unemployment.     

Union Wage Effects in the Presence of Enterprise Bargaining

Previous research on union wage effects has underestimated the potential for unions to raise member wages since the data used do not enable differences across bargaining units to be properly accounted for. This study addresses this deficiency by utilizing matched employer–employee data that permit workplace-specific union wage effects to be identified. Results from the estimation of wage equations indicate that, while there is only a very small intra-workplace union wage effect, differences across workplaces are considerable. This differential, however, only exists at workplaces where there is substantial coverage by collective agreements.     

Flexible and Committed Profit Sharing with Wage Bargaining: Implications for Equilibrium Unemployment

We analyze the relationship between profit sharing, employee effort, wage formation and unemployment under different relative timings of the wage and profit sharing decisions. The optimal profit share under commitment exceeds that under flexibility, because through a profit share commitment the firm can induce wage moderation. The negotiated profit sharing depends positively on the bargaining power of trade union and it has both effort-enhancing and wage-moderating effects. Higher profit sharing is shown to reduce equilibrium unemployment under ``sufficiently rigid' labor market institutions, but it can harm employment when labor market ``rigidities' are ``small enough'.     

The Level of Wage Bargaining as a Firm–Union Choice

There is a trade-off between central bargaining which allows local externalities to be internalized and local bargaining which gives firms and unions the scope to determine both wages and employment simultaneously and efficiently in the sense of McDonald and Solow (1981). A model of strong unions is presented where workers are also concerned with relative wages. The trade-off is resolved by the individual firm and union on the basis of choice, using the Pareto-criterion. In the presence of a small extra contract cost under local bargaining, the main findings are: (i) central bargaining is Pareto-optimal only for extreme values of the reservation income level—a change in unemployment remuneration may cause centralization to breakdown; and (ii) centralization may also be sustained as a suboptimal Nash-equilibrium through workers' concern with relative wages—the familiar Keynesian coordination failure.     

Fairness Considerations in Labor Union Wage Setting – A Theoretical Analysis

We consider a theoretical model in which unions not only take the outside option into account, but also care about the performance of the firm and base their wage‐setting decisions on a firm internal reference, called the fairness reference. Two references, which measure the earnings situation of the firm, are considered – productivity and profits per worker. Wage and employment outcomes as well as the degree of wage rigidity depend on the size of the fairness reference relative to the outside option. A high fairness reference leads to wage pressure and real wage rigidity, whereas a low fairness reference leads to wage moderation and real wage flexibility. An increase in the weight on the fairness reference amplifies these deviations from the standard model.     

Why has the Unemployment Rate Been so Low in Japan? An Explanation by Two‐Part Wage Bargaining

The Japanese wage payment system is considered from a perspective of two-part tariff pricing. Using the "amusement park" analogy, Shunto wages can be regarded as an "entrance fee", whereas bonuses are a "variable charge". Empirical investigation showed that a qualitative difference exists between these two types of wage: Shunto sets the coordinated wage rate by focusing on the whole labour market condition, while bonuses respond to idiosyncratic shock. Based on the standard prediction of two-part wage tariff pricing, such a unique combination is the ultimate source of Japan's low unemployment.
JEL Classification Number: J51.     

Wage Formation and Bargaining Power during the Great Depression*

We present an econometric analysis of wage behaviour in Norway during the interwar years. The analysis is based on a panel of manufacturing industry data using GMM estimation methods. Our empirical analysis shows that wage formation in the interwar period can be understood with the help of modern bargaining theory and well‐established wage equations. We estimate a long‐run wage curve that has all the standard features of being homogeneous in prices, proportional to productivity, and with a negative unemployment elasticity. We also present some new Monte Carlo evidence on the properties of the estimators used.     

A Note on Franchising and Wage Bargaining

A franchising contract relocates distributable rent between franchisor and franchisee. With decentralized wage bargaining relocation modifies the position of the union in the wage bargaining. If the rent is relocated to the franchisor completely, then even a strong union is not able to raise wage above reservation level in the franchisee's firm. If franchisor and franchisee negotiate on rent division, there is an incentive to increase the franchise fee at the expense of the union. Therefore the overall rent assigned to labor depends on the differences of labor intensity in the franchisor's and franchisee's firms. Firm owners may be able to transfer distributable rents from a firm with a strong union to one with a weak union. Furthermore, a franchising contract shows a first mover advantage. A franchising contract is placed before wage bargaining, benefiting the franchisor.     

Technological Complexity, Wage Differentials and Unemployment

A model is developed to analyse the relation between wages and technological complexity, as characterised by the "O–ring" theory of production. In equilibrium, the adoption of a relatively complex technology induces the employer to pay higher wages. We argue that the model can explain increased within–group wage inequality as a consequence of increased technological heterogeneity among firms.
JEL classification : J 31; O 33     

On the Effects of Wage Pressure on the Unemployment Rate and Capital Share

Abstract. The purpose of this paper is to understand the behaviour of the capital share and the unemployment rate in Europe over the past quarter of a century. We consider a model with monopolistic competition, increasing returns and an imperfect labour market, assuming that the elasticity between capital and labour is less than unity. Previous works have generally assumed constant returns to scale. Our results offer an important conclusion, namely that increased wage pressure will increase the unemployment rate and the capital share even though the latter initially decreases, which fits the stylized facts about the studied economies.     

策略性采购联盟、集体谈判与最优贸易政策选择——基于广义Cournot-Nash谈判函数的分析

文章发展了一个关于由本国企业组成的中间品策略性采购联盟与外国垄断性供给者进行集体谈判的模型一—该模型以中国的制造业外包服务,即出口加工贸易实践为基础,其中,中间品的采购价格与数量通过有效的Nash谈判过程同时决定。当采购联盟的效用函数的数量弹性高于（低于）价格弹性,则该联盟的偏好为数量（价格）导向的。文章证明：（1）当本国与外国的中间品与最终产品贸易具有互补性时,政府贸易政策调整的价格、数量以及福利效应是不确定的,它们依存于本国采购联盟的偏好、最终产品需求曲线的弹性与曲率、外国企业的技术以及生产专业化程度;（2）政府贸易政策的干预功能与企业策略性联盟的自主调整功能存在重叠与冲突。