We examine the impact of changes in minimum wages regulation on unionized workers. The bargaining process between the management and the union is modeled as an alternating-offers bargaining game over employment and wage. We find that the equilibrium wage is equal to the minimum wages and that an increase in minimum wages decreases the income of the employer, as well as the level of employment and hence of output. Moreover if the marginal product of labour is inelastic, then the income of the union declines as well. Thus our results seriously question the validity of indiscriminate increases in minimum wages.
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Article provided by Department of Economics, Delhi School of Economics in its journal Indian Economic Review.
Volume (Year): 33 (1998) Issue (Month): 2 (July) Pages: 169-184 Download reference. The following formats are available: HTML
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Find related papers by JEL classification: J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
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