Two-stage bargaining with coverage extension in a dual labour market
AbstractThis paper studies two-stage bargaining in a simple general equilibrium model with a dual labour market. We analyse the case where agreements reached at the central level in the unionized sector extend beyond this sector, which seems to be a characteristic feature of continental European labour markets. Conditions are identified under which firms and unions have a commonality of interest in extending coverage of a minimum wage to the non-unionized sector of the economy. In many countries, labour markets comprise a primary sector with high non-market clearing wages and job queues, and a secondary sector with market clearing. The latter arises endogenously in our model: it is optimal for the unionized sector to impose a market clearing wage on the non-unionized sector. This suggests that coverage extension can increase welfare.
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Bibliographic InfoArticle provided by Elsevier in its journal European Economic Review.
Volume (Year): 44 (2000)
Issue (Month): 1 (January)
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Other versions of this item:
- Mark A. Roberts & Karsten Stæhr & Torben Tranæs, 1997. "Two-Stage Bargaining with Coverage Extension in a Dual Labour Market," Discussion Papers 97-13, University of Copenhagen. Department of Economics.
- Mark A. Roberts & Karsten Stæhr & Torben Tranæs, . "Two-Stage Bargaining with Coverage Extension in a Dual Labour Market," EPRU Working Paper Series 97-28, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
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