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Should civil servants be restricted in wage bargaining? A mixed-duopoly approach

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  • Ishida, Junichiro
  • Matsushima, Noriaki

Abstract

Should civil servants (employees in the public sector) be allowed to bargain collectively? To answer this question, we construct a model of unionized mixed duopoly and examine the regulatory framework of public institutions, especially focusing on a wage regulation imposed on the public firm. The wage regulation turns out to yield critical welfare implications as it gives rise to two opposing strategic effects: the wage regulation intensifies downstream-market competition while it loosens upstream-market competition. The overall welfare effect is ambiguous, depending crucially on the degree of product differentiation between the firms. We also show that, in contrast to the popular belief, granting the right to bargain collectively to civil servants would not necessarily help them because they tend to demand excessively high wages when they are allowed to bargain collectively. Finally, we briefly discuss a new perspective on the role of profit motives in public institutions when the wages are determined endogenously.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 93 (2009)
Issue (Month): 3-4 (April)
Pages: 634-646

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Handle: RePEc:eee:pubeco:v:93:y:2009:i:3-4:p:634-646

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Web page: http://www.elsevier.com/locate/inca/505578

Related research

Keywords: Mixed oligopoly Wage bargaining Wage regulation Labor unions Strategic complements;

References

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Citations

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Cited by:
  1. Hiroaki Ino & Toshihiro Matsumura, 2009. "What role should public enterprises play in free-entry markets?," Discussion Paper Series 46, School of Economics, Kwansei Gakuin University, revised Jun 2009.
  2. Kangsik, Choi, 2008. "Cournot-Bertrand competition in a unionized mixed duopoly," MPRA Paper 12787, University Library of Munich, Germany, revised 26 Dec 2008.
  3. Kangsik, Choi, 2009. "Privatization, Government's Preference and Unionization Structure: A Mixed Oligopoly Approach," MPRA Paper 13028, University Library of Munich, Germany.
  4. Choi, Kangsik, 2010. "The Timing of Endogenous Wage Setting under Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 20205, University Library of Munich, Germany.
  5. Herr, Annika, 2009. "Product differentiation and welfare in a mixed duopoly with regulated prices: the case of a public and a private hospital," IWQW Discussion Paper Series 08/2009, Friedrich-Alexander-Universität Erlangen-Nürnberg, Institut für Wirtschaftspolitik und Quantitative Wirtschaftsforschung (IWQW).
  6. Choi, Kangsik, 2012. "Indirect Taxation and Privatization in a Model of Government's Preference," MPRA Paper 42968, University Library of Munich, Germany.
  7. Gonzalo F De córdoba & Javier J Pérez & José L Torres, 2012. "On the substitutability between public and private employment," Economics Bulletin, AccessEcon, vol. 32(3), pages 2700-2709.
  8. Joaquín Andaluz, 2011. "Validity of the “Principle of Maximum Product Differentiation” in a unionized mixed-duopoly," Journal of Economics, Springer, vol. 102(2), pages 123-136, March.
  9. Natália P. Monteiro & Miguel Portela & Odd Rune Straume, 2010. "Firm ownership and rent sharing," NIPE Working Papers 13/2010, NIPE - Universidade do Minho.
  10. Choi, Kangsik, 2009. "Government's Preference and Timing of Endogenous Wage Setting: Perspectives on Privatization and Mixed Duopoly," MPRA Paper 17221, University Library of Munich, Germany.
  11. Annika Herr, 2011. "Quality and Welfare in a Mixed Duopoly with Regulated Prices: The Case of a Public and a Private Hospital," German Economic Review, Verein für Socialpolitik, vol. 12(4), pages 422-437, November.
  12. Takeshi Ebina & Toshihiro Matsumura & Daisuke Shimizu, 2009. "Mixed oligopoly and spatial agglomeration in quasi-linear city," Economics Bulletin, AccessEcon, vol. 29(4), pages 2722-2729.
  13. Choi, Kangsik, 2008. "Comparing Cournot and Bertrand Competition in a Unionized Mixed Duopoly," MPRA Paper 15468, University Library of Munich, Germany, revised 27 May 2009.
  14. Juan Bárcena-Ruiz & F. Casado-Izaga, 2012. "Location of public and private firms under endogenous timing of choices," Journal of Economics, Springer, vol. 105(2), pages 129-143, March.
  15. Choi, Kangsik, 2010. "Strategic Budget Constraints of Public Firm under Bertrand Competition of Unionized Mixed Duopoly," MPRA Paper 19969, University Library of Munich, Germany.

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