Dittrich, Marcus (2006): Welfare Effects of Union Bargaining Centralisation in a Two-Sector Economy.
Download (127kB) | Preview
The paper analyses the welfare effects of union bargaining centralisation in a simple general equilibrium model. A two-sector model is developed where the wage rate in the first sector is either set decentralised by a small union at the firm level or centralised by a large union covering all workers. Worker's outside option is employment in the second sector with wages adjusting to clear the market. The paper shows that social welfare depends on (i) whether the union considers the connection between wages in both sectors, (ii) the structure of the union's objective function, and (iii) the elasticities of labour demand. The welfare maximising employment allocation can be obtained under a high degree of centralisation if the union maximises the total wage-bill. Otherwise, if the union is rent maximising, neither centralised nor decentralised wage setting yield the social optimum. A second best optimum can then be obtained under decentralised bargaining.
|Item Type:||MPRA Paper|
|Original Title:||Welfare Effects of Union Bargaining Centralisation in a Two-Sector Economy|
|Keywords:||Unions; Bargaining centralisation; Two-sector economy; Social welfare|
|Subjects:||J - Labor and Demographic Economics > J6 - Mobility, Unemployment, Vacancies, and Immigrant Workers > J61 - Geographic Labor Mobility ; Immigrant Workers
J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J51 - Trade Unions: Objectives, Structure, and Effects
|Depositing User:||Marcus Dittrich|
|Date Deposited:||26. Sep 2006|
|Last Modified:||07. Apr 2015 07:41|
Barth, E. & Zweimüller, J. (1995), ‘Relative wages under decentralized and corporatist bargaining systems’, Scandinavian Journal of Economics 97(3), 369–384. Booth, A. (1995), The Economics of the Trade Union, Cambridge University Press, Cambridge. Calmfors, L. (1993), Centralisation of wage bargaining and macroeconomic performance: A survey, OECD Economics Department Working Papers 131, OECD. Calmfors, L. & Driffill, J. (1988), ‘Bargaining structure, corporatism and macroeconomic performance’, Economic Policy 6, 13–61. Daveri, F. & Tabellini, G. (2000), ‘Unemployment, growth and taxation in industrial countries’, Economic Policy 30, 49–104. de Menil, G. (1971), Bargaining: Monopoly Power versus Union Power, MIT Press, Cambridge, MA. Dittrich, M. & Schirwitz, B. (2006), A dynamic model of union behaviour. The role of an endogenous outside option and bargaining centralisation, Dresden Discussion Papers in Economics 5, Dresden University of Technology. Dunlop, J. (1944), Wage Determination under Trade Unions, Macmillan, New York. Elster, J. (1989), The Cement of Society. A Study of Social Order, Cambridge University Press, Cambridge. Hieser, R. (1970), ‘Wage determination with bilateral monopoly in the labour market: A theoretical treatment’, Economic Record 46, 55–72. Hoel, M. (1989), ‘Efficiency wages and local versus central wage bargaining’, Economics Letters 30, 171–175. Hoel, M. (1990), ‘Local versus central wage bargaining with endogenous investments’, Scandinavian Journal of Economics 92(3), 453–469. Hoel, M. (1991), ‘Union wage policy: The importance of labour mobility and the degree of centralization’, Economica 58(230), 139–53. Holmlund, B. & Lundborg, P. (1988), ‘Unemployment insurance and union wage setting’, Scandinavian Journal of Economics 90(2), 161–172. Holmlund, B. & Lundborg, P. (1999), ‘Wage bargaining, union membership, and the organization of unemployment insurance’, Labour Economics 6(3), 397–415. Johnston, J. (1972), ‘A model of wage determination under bilateral monopoly’, Economic Journal 82, 837–852. Kiander, J. (1993), ‘Endogenous unemployment insurance in a monopoly union model when job search matters’, Journal of Public Economics 52, 101–115. Kilponen, J. & Sinko, P. (2005), ‘Taxation and centralised wage setting: The case of endogenous labour supply’, Scottish Journal of Political Economy 52(4), 587–606. Moene, K. O. & Wallerstein, M. (1993), Bargaining structure and economic performance, in R. Flanagan, K. O. Moene & M. Wallerstein, eds, ‘Trade Union Behaviour, Pay Bargaining and Economic Behaviour’, Clarendon Press, Oxford. Oswald, A. J. (1979), ‘Wage determination in an economy with many trade unions’, Oxford Economic Papers 31(3), 369–85. Oswald, A. J. (1985), ‘The economic theory of trade unions: An introductory survey’, Scandinavian Journal of Economics 87(2), 160–193. Pencavel, J. (1991), Labor Markets under Trade Unionism: Employment, Wages, and Hours, MIT Press, Cambridge, MA. Rasmussen, B. S. (1992), ‘Union cooperation and nontraded goods in general equilibrium’, Scandinavian Journal of Economics 94(4), 561–79. Rodseth, A. (1993), ‘Efficiency wages and local versus central bargaining’, Oxford Economic Papers 45(3), 470–481. Rosen, S. (1970), ‘Unionism and the occupational wage structure in the united states’, International Economic Review 11, 269–286. Rowthorn, R. E. (1992), ‘Centralisation, employment and wage dispersion’, Economic Journal 102(412), 506–23. Sinko, P. (2004), ‘Subsidizing versus experience rating of unemployment insurance in unionized labor markets’, FinanzArchiv 60(2), 186–204. Summers, L. H., Gruber, J. & Vergara, R. (1993), ‘Taxation and the structure of labor markets: The case of corporatism’, Quarterly Journal of Economics 108(2), 385– 411. Wallerstein, M. (1990), ‘Centralized bargaining and wage restraint’, American Journal of Political Science 43, 982–1004. 16