Corruption, efficiency wage and union leadership

Chaudhuri, Sarbajit and Ghosh Dastidar, Krishnendu (2014): Corruption, efficiency wage and union leadership.

Abstract

This paper develops a model of determination of unionized wage in the presence of both collective bargaining and efficiency wage. The efficiency of each worker is positively related to both the wage and the unemployment rate in the economy. The unionized wage is greater than the efficiency wage. The firm finds it profitable to keep the unionized wage as close as possible to the efficiency wage. The union leader who is entrusted with the task of determining the unionized wage charges a bribe from the firm to keep the wage close to this level. The corrupt trade union leader and the management of the firm play a two-stage Nash bargaining game from where equilibrium unionized wage and the bribe are determined. The analysis leads to some interesting results which are important for anticorruption policy formulation.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corruption, Collective Bargaining, Efficiency Wage, Union, Firms
• Subjects: D - Microeconomics > D2 - Production and Organizations > D22 - Firm Behavior: Empirical Analysis; D - Microeconomics > D7 - Analysis of Collective Decision-Making > D73 - Bureaucracy ; Administrative Processes in Public Organizations ; Corruption; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J51 - Trade Unions: Objectives, Structure, and Effects; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O17 - Formal and Informal Sectors ; Shadow Economy ; Institutional Arrangements

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