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Regulation with wage bargaining

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  • Dag Morten Dalen
  • Nils-Henrik M von der Fehr
  • Espen R Moen

Abstract

In many regulated industries labour unions are strong and there is clear empirical evidence of labour rent-sharing. In this paper, we study optimal regulation in a model in which wages are determined endogenously by wage bargaining at the firm level. A seemingly robust conclusion, at least when worker bargaining power is considerable, is that incentives for cost efficiency should be stronger than in the standard case in which wages do not depend on the regulatory regime. Copyright 2003 Royal Economic Society.

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Bibliographic Info

Article provided by Royal Economic Society in its journal The Economic Journal.

Volume (Year): 113 (2003)
Issue (Month): 487 (04)
Pages: 525-538

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Handle: RePEc:ecj:econjl:v:113:y:2003:i:487:p:525-538

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  1. Laffont, Jean-Jacques & Martimort, David, 1995. "Collusion and Delegation," IDEI Working Papers 54, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Wallace Hendricks, 1975. "The Effect of Regulation on Collective Bargaining in Electric Utilities," Bell Journal of Economics, The RAND Corporation, vol. 6(2), pages 451-465, Autumn.
  3. Jean Tirole, 1985. "Procurement and Renegotiation," Working papers 362, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. David Card, 1996. "Deregulation and Labor Earnings in the Airline Industry," NBER Working Papers 5687, National Bureau of Economic Research, Inc.
  5. Rose, Nancy L, 1987. "Labor Rent Sharing and Regulation: Evidence from the Trucking Industry," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1146-78, December.
  6. Tirole, Jean, 1994. "The Internal Organization of Government," Oxford Economic Papers, Oxford University Press, vol. 46(1), pages 1-29, January.
  7. Dalen, Dag Morten, 1995. "Efficiency-improving investment and the ratchet effect," European Economic Review, Elsevier, vol. 39(8), pages 1511-1522, October.
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