The Single-Mindedness of Labor Unions: Theory and Empirical Evidence

Canegrati, Emanuele (2007): The Single-Mindedness of Labor Unions: Theory and Empirical Evidence. Unpublished.

Abstract

In this paper I analyse a labour market where the wage is endogenously determined according to an Efficient Bargaining process between a firm and a labour union whose members are partitioned into two social groups: the old and the young. Furthermore, I exploit the Single-Mindedness theory, which considers the existence of a density function which endogenously depends on leisure. I demonstrate that, when preferences of one group for leisure are higher than those of the other group the latter suffers from higher tax rates and with lower level of wage rates and lower levels of leisure. Finally, since the former is more single-minded, it may exploit its greater political power in order to get a positive intergenerational transfer. Empirical evidence from the WERS 2004 survey confirms main results of the model.

• Item Type: MPRA Paper
• Institution: catholic university of sacred heart milan
• Language: English
• Keywords: bargaining models; labour unions; political economy; single-mindedness
• Subjects: J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J51 - Trade Unions: Objectives, Structure, and Effects; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J50 - General; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J52 - Dispute Resolution: Strikes, Arbitration, and Mediation; Collective Bargaining; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy; J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J22 - Time Allocation and Labor Supply; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J58 - Public Policy; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D71 - Social Choice; Clubs; Committees; Associations; J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J21 - Labor Force and Employment, Size, and Structure; J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J26 - Retirement; Retirement Policies; J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J20 - General

References

[1] Aronsson T & Sjogren T: Ecient Taxation, Wage Bargaining and Policy Coordination (2002) mimeo

[2] Boswirth, D., Dawkins, P & Stromback T.: The Economics of the Labour Market (1996) Longman

[3] Bosworth, D., Dawkins, P. & Stromback, T.: The Economics of the Labour Market (1996) Longman

[4] Brennan G & Buchanan J.M: The Power to Tax: Analytical Foundations of a Fiscal Constitution (1980) Cambridge: Cambridge University Press

[5] Bryson, A. & Gomez, R.: Why Have Workers Stopped Joining Unions? The Rise in Never-Membership in Britain (2005) British Journal of Industrial Relations, Vol. 43, pp. 67-92

[6] Canegrati E.: The Single Mindedness Theory: Microfundatition and Application to labour Market (2006) Mimeo

[7] Chica Y. & Espinosa M. P.: Union Formation and Bargaining Rules in the labour Market (2005) Mimeo

[8] Creedy J & McDonald I: Models of Trade Union Behaviour: A Synthesis (1991) Economic Record, pp. 346-359

[9] Department of Trade and Industry Review of the Employment Relations Act 1999 (2003) http:www.dti.gov.uk/er/

[10] Diamond P. & Mirrlees J. Optimal Taxation and Public Provision 1: Production Eciency (1971) American Economic Review, Vol.61, pp.8-27

[11] Diamond P. Pensions for an Aging Population (2005) NBER Working Papers 11877

[12] Diamond P. & Gruber J. Social Security and Retirement in the U.S., (1997) NBER Working Paper 6097

[13] Department of Trade and Industry Workplace Employment Relations Survey: Cross-Section 2004 [computer file] (2005) 1st ed. Colchester: The Data Archive [distributor], 21 December 2005. SN: 5294.

[14] Dunlop, J. Wage Determination under Trade Unions, (1944) Macmillan, New York

[15] Earle, J. S, & Pencavel, J.: Hours of Work and Trade Unionism (1990) Journal of Labour Economics, Vol. 8(1), pp.150-174

[16] Edwards J & Keen M.: Tax Competition and Leviathan (1996) European Economic Journal, Vol. 46, pp.113-134

[17] Feldstein M. & Liebman J.: Social Security, (2001) NBER Working Paper 8451

[18] Fuest C. & Huber B.: Tax Coordination and Unemployment (1999) International Tax and Public Finance, Vol.6, pp.7-26

[19] Garonna, P., Mori, P. & Tedeschi, P.: Economic Models of Trade Unions (1992), Chapman & Hall

[20] Gilles Saint-Paul Toward a Theory of labour Market Institutions (1999), mimeo

[21] Grossman, G. Union Wages, Temporary Layos and Seniority (1983), American Economic Review, vol. 73 (3), pp. 277-90

[22] Hersoug T.: Union Wage Responses to Tax Changes (1984) Oxford Economic Papers, Vol. 36, pp. 37-51

[23] Hinich M.J.: Equilibrium in Spatial Voting: The Median Voter Theorem is an Artifact (1977) Journal of Economic Theory, Vol. 16, pp. 208-219

[24] HungerBuhler M.: Tax Progression in Imperfect Labour Markets: A Survey (2004) mimeo

[25] Hunnicut, B. K.: The End of Shorter Hours (1984) Labor History Vol.25(3), pp. 373-404

[26] Kersley, B., Alpin, C., Forth, J., Bryson, A., Bewley, H., Dix, G. & Oxenbridge, S. First Findings from the 2004 Workplace Employment Relations Survey (2005), London: Department of Trade and Industry http:www.dti.gov.uk/er/

[27] Koskela E. & Schob R.: Optimal Capital Taxation in Economies with Unionised and Competitive Labour Market (2002) CESifo Working Paper No.189

[28] Koskela E. & Schob R.: Optimal Factor Income Taxation in the Presence of Unemployment (2002) Journal of Public Economic Theory, Vol. 4(3), pp.387-404

[29] Koskela E. & Vilmunen J.: Tax Progression is Good for Employment in Popular Models of Trade Union Behaviour (1996) labour Economics, Vol. 3, pp.65-80

[30] ILO: World Labour Report 1997-1998 (1998)International Labour Of- fice

[31] Leontief W.: The Pure Theory of Guaranteed Annual Wage Contract (1946) Journal of Political Economy, vol.54, No.1, pp.76-79

[32] Lindbeck,A. & Snower, D.: The Insider-Outsider Theory: A Survey (2002) IZA Discussion Paper No. 534

[33] Manning A.: An Integration of Trade Union Models in a Sequential Bargaining Framework (1987) The Economic Journal, vol. 97, No.385, pp. 121-139

[34] McDonald I. & Suen A. On the Measurement and Determination of Trade Union Power (1992) Oxford Bulletin of Economics and Statistics, 54, 2 pp. 209-224

[35] McDonald, I. & Solow, R. Wage Bargaining and Employment (1981) American Economic Review vol.71(5), pp. 896-908

[36] Mulligan B.: Can Monopoly Unionism Explain Publically Induced Retirement? (2000) Mimeo

[37] Mulligan C. B. & Xala-i-Martin: Gerontocracy, Retirement and Social Security (1999) NBER Working Paper 7117

[38] Mulligan C. B. & Xala-i-Martin: Social Security in Theory and Practice (I): Facts and Political Theories (1999) NBER Working Paper 7118

[39] Mulligan C. B. & Xala-i-Martin: Social Security in Theory and Practice (II): Eciency Theories, Narrative Theories and Implications for Reforms (1999) NBER Working Paper 7119

[40] Mulligan C. B. & Xala-i-Martin: Social Security, Retirement and the Single-Mindness of the Electorate (1999) NBER Working Paper 9691

[41] McDonald I & Solow R.: Wage Bargaining and Employment, (1981) American Economic Review Vol. 71, No. 5, pp.896-908

[42] Nickell S.J. & Andrews M.: Unions, Real Wages and Employment in Britain 1951 - 79 (1983) Oxford Economic Papers, Vol.35, pp.183-206

[43] Oates W.E.: Fiscal Federalism (1972), New York: Harcourt, Brace and Jovanovich

[44] Oswald A. J.: The Economic Theory of Trade Unions: An Introductory Survey Scandinavian Journal of Economics,(1985) Vol.87(2), pp. 160- 193

[45] Profeta, P.: Retirement and Social Security in a Probabilistic Voting Model, (2002) International Tax and Public Finance, 9, pp 331-348

[46] Summers L., Gruber J. & Vergara R.: Taxation and the Structure of labour Markets: The Case of Corporatism, (1993) Quarterly Journal of Economics,

[47] Persson T. & Tabellini G.: Political Economics: Explaining the Economic Policy (2000) MIT Press

[48] Ramsey F.P.: A Contribution to the Theory of Taxation, (1927) Economic Journal, Vol. 37, No. 1, pp. 47-61