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.     

The Welfare and Employment Effects of Centralized Public Sector Wage Bargaining

In many countries, the government pays almost identical nominal wages to workers living in regions with notable economic disparities. By developing a two‐region general equilibrium model with endogenous migration and search frictions in the labor market, I study the differences in terms of unemployment, real wages, and welfare between a regional wage bargaining process and a national one in the public sector. Adopting the latter makes residents in the poorer region better off and residents of the richer region worse off. Private sector employment decreases in the poorer region and it increases in the richer one. Under some conditions, the unemployment rate in the poorer region soars.     

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.     

Taxation and Wage Bargaining*

The paper analyzes the effects of personal taxes on wage bargaining It concludes that an increase in tax progressivity will normally increase union wage-bargaining pressure and so raise the equilibrium wage This is the opposite result to that recently derived by Creedy and McDonald (1990).     

A Theoretical Analysis of Trade Union Membership Fees, Bargaining Power, Wage Rate and Unemployment

The positive effect of membership fees on trade unions' cohesion and commitment and the adverse effect of these fees on trade unions' density imply that the effects of membership fees on trade unions' bargaining power, wage rate and unemployment can be depicted by inverted U-shaped curves whose upper bounds are reached when membership fees are set at half the ratio of the upper-bound on members' level of satisfaction from the trade union services to their disposable income rate. The implications of these effects for membership fees are analysed for a trade union that sets its membership fee so as to minimise the loss stemming from missing wage rate and unemployment targets.     

Bargaining over a Menu of Wage Contracts

We investigate an infinite horizon bargaining problem in which a firm and a worker bargain over two dimensions, quality and wage. The worker has private information about his type. Only the uninformed firm makes an offer and it can offer a menu of quality-wage contracts instead of single one. We show that for all discount factors, the unique sequential equilibrium outcome is separating without delay; the firm separates the types of worker with a menu of contracts in the first period. Our result shows that in multi-dimensional bargaining, the "Coase Conjecture" holds in the sense that the game ends in the first period. But it fails in the sense that the uninformed party can preserve the entire bargaining power.     

Fiscal Institutions and Wage Bargaining in the Local Public Sector

In a theoretical analysis of the properties of different wage setting and financing systems in the local public sector, two financing systems are considered. A benchmark model with local financing through local taxes is compared with a system of centralized financing through grants, where taxes are decided at the national level. It is shown that the wage outcomes under centralized financing depend heavily on the order of moves in the budgetary game between the central and local levels.
JEL Classification : H 23; J 45     

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.     

Monetary policy implementation and transmission in the European Monetary Union

I discuss possible problems engendered by loss of national monetary policies, and study them from three empirical perspectives. First, are business cycles sufficiently synchronized across EMU member countries? The evidence suggests that economic activity in those countries has become increasingly correlated in the 1990s, and that policy co–ordination has played a role in generating that outcome. Second, are there asymmetries in the mechanisms through which policy affects economic activity? The paper documents that policy transmission was indeed heterogeneous in the member countries, and that structural and financial factors were sensibly related to cross–country differences in the response of output to a monetary policy shock. Third, how is policy implemented in an environment of diverse business cycle fundamentals and transmission mechanisms? Estimation of monetary policy reaction functions finds that the European Central Bank is closer to an aggregate of the central banks in Germany, France, and Italy than to the Bundesbank alone.     

Wage Bargaining Versus Efficiency Wages: A Synthesis

We construct a model integrating the efficiency wage model of Shapiro–Stiglitz (1984) (SS), with an individual wage bargaining model in the Diamond–Mortensen–Pissarides (DMP) tradition where firms and workers form pairwise matches. We show that when workers may threaten to shirk on the job and there is individual wage bargaining, the wage is always higher and employment lower than in either the SS model, or the (appropriately modified) DMP model. When firms determine workers' efforts unilaterally, efforts are set inefficiently low in the SS model. In the bargaining model, effort is higher, and is first best when the worker non–shirking constraint does not bind. The overall equilibrium allocation may then be more or less efficient than in the SS model, but is always less efficient than in a pure bargaining model with no moral hazard.     

Monetary Policy Delegation and Optimal Wage Indexation

This note shows that delegation of policy to a central banker who puts more weight on inflation stabilization than does the rest of society could reduce the alleged social inefficiency of private wage indexation decisions that arises in models of discretionary monetary policy.     

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     

Wage Indexation, Employment and Inflation

Price versus productivity-indexing is considered in a model of monetary policy with incomplete information and wage bargaining. In a perfectly price-indexed economy, the inflationary bias due to lack of credibility is eliminated. However, productivity-indexing is more appropriate to dampen macroeconomic fluctuations that are caused by real disturbances. We show that productivity-indexing alone guarantees both price and employment stability, provided the government's reputation is good enough and the union's bargaining power is not too strong. This reduces the degree of price indexation as the union becomes weaker and the government's reputation improves. Productivity-indexing is desirable with volatile productivity processes and weak unions.
JEL classification : E 24; E 52     

Multiple Wage Bargaining Systems in the Single European Currency Area

Little attention in the EMU literature has been paid to the interaction between centralbank monetary rules and systems of collective wage bargaining. Analytically andempirically, coordinated wage bargaining systems respond with real wage restraintto non-accommodating monetary policy. Since wage determination is dominated bycollective bargaining in all the EMU member states and wage coordination within themember states has grown since 1980, this is a topic of potential importance. In particular, the replacement of the Bundesbank, directly targeting German inflation, by an ECB targeting European inflation has removed a major institutional support of wage restraint in Germany. The consequences of this for EMU are worked out under two scenarios, that inflation expectations will be generated by ECB monetary policy and that they will reflect German inflation outcomes. Possible institutional developments are discussed including government-union bargains. The Bundesbank has also played a major role in maintaining fiscal rectitude by targeting excess fiscal deficits in Germany: again its replacement by the ECB – targeting (if at all) European rather than German fiscal policy – loosens fiscal constraints. For underlying structural reasons therefore, it is possible that Germany and other EMU countries will move to a period of fiscal activism with wage restraint and low inflation purchased through social contract negotiations.     

Relative Prices in Monetary Union and Floating

The setting is a small open economy with an open sector and a sheltered sector. If the unions that operate in each sector coordinate their wage claims within the sector, the choice of monetary regime—monetary union or floating with an inflation target—affects the relative prices of tradables and non–tradables as well as real wages and employment. EMU membership results in lower prices of tradable goods and lower relative wages in the open sector, while opposite results hold for sheltered sector prices and wages.
JEL classification : E 5; E 24; E 42; J 5; J 31     

最低工资、就业弹性及就业效应研究

最低工资标准的提升对于就业的效应究竟是正是负,目前理论界并没有一致的论证结果。本文首先从市场结构和企业应对措施两个角度,梳理了西方学界关于最低工资对就业影响的作用机理,然后建立一个涉及农民工、企业和政府三方的博弈模型,推导出行业就业弹性对劳动参与的关键作用,并利用全国各省市六个行业的面板数据进行了实证分析。本文的主要结论是,最低工资的实施标准按行业设置比目前按地区＂一刀切＂的模式更具科学性。     

Wage Rigidity, Monetary Integration and Fiscal Stabilization in Europe

Flexibility in fiscal policy is a necessary ingredient in a policy package for EMU. Even with strong endogenous shock absorbers, such as real wage flexibility, fiscal policy can speed up the stabilization process in response to demand shocks. If real wages are rigid, as they typically are in Europe, fiscal policy cannot remove the adverse effects of asymmetric supply shocks, but it can successfully limit the divergence between member states. Monetary flexibility, a possible option in the run-up to EMU, cannot completely make up for the stabilization function of fiscal policy.