How does reciprocal behaviour of workers influence the wage setting of unions? |
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Authors: | Tobias Kronenberg |
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Institution: | (1) Institute of Energy Research, Systems Analysis and Technology Evaluation (IEF-STE), Research Centre Juelich, 52425 Juelich, Germany |
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Abstract: | Traditional wage setting models assume that unions maximise the total income of workers, whereas actually they should maximise
worker utility. These models implicitly equate utility with income, but this is not valid if workers’ utility depends on their
sense of fairness and includes a non-pecuniary benefit from work. This paper presents a model combining efficiency wages with
bargaining theory, drawing inspiration from the gift-exchange approach by Akerlof Q J Econ 97(4):543–569, 1982]. It shows
that the mutual gift exchange between firms and workers generates a non-pecuniary benefit which contributes to the workers’
utility in a non-monotonic way depending on the strength of workers’ sense of fairness. The model shows that if an employment
subsidy is paid to workers it generates more jobs than when paid to firms.
This paper is based on research which was performed while the author was employed at the University of Maastricht (The Netherlands).
The author wishes to thank Thomas Ziesemer, Erik de Regt, Sabine Fuss and Kristin Vetter for many helpful comments and assumes
full responsibility for any remaining flaws. |
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Keywords: | Non-pecuniary benefit Fairness Happiness Satisfaction Unemployment |
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