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On the incentives to increase input efficiency under monopoly trade unions

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  • Tapan Biswas

    (Centre for Economic Policy, University of Hull, Hull HU6 7RX, UK)

  • Jolian McHardy

    (Department of Economics, University of Sheffield, 9 Mappin Street, Sheffield S1 4DT, UK)

Abstract

(Originally published in the Journal of Economic Behaviour and Organization 2007, 62(4), 657-669) - We examine the effects of and the incentives for increasing input efficiency within a spatially segregated Cournot duopoly with monopoly trade unions whose utility functions depend on both wages and employment. We show that with neoclassical as well as Leontief technology, unions raise wages to appropriate fully the gains from labor-saving technological (or organisational) improvements, leaving the firm with no incentive to invest in increasing the efficiency of workers. However, capital-saving technological improvement may be profitable depending on the elasticity of substitution. Finally, we examine the implication of a fixed minimum wage (or competitive labor market) in one country. - © 2006 Elsevier B.V. All rights reserved.

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Bibliographic Info

Article provided by Rimini Centre for Economic Analysis in its journal Review of Economic Analysis.

Volume (Year): 4 (2012)
Issue (Month): 1 (June)
Pages: 39-51

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Handle: RePEc:ren:journl:v:4:y:2012:i:1:p:39-51

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Related research

Keywords: Unions; Technological change; Cournot duopoly;

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  1. Biswas, Tapan & McHardy, Jolian P., 2003. "The long-run effect of a wage policy on employment," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 267-273, April.
  2. Harley Frazis & Maury Gittleman & Mary Joyce, 2000. "Correlates of training: An analysis using both employer and employee characteristics," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 53(3), pages 443-462, April.
  3. Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-44, April.
  4. Paz Espinosa, Maria & Rhee, Changyong, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 565-88, August.
  5. Calabuig, Vicente & Gonzalez-Maestre, Miguel, 2002. "Union structure and incentives for innovation," European Journal of Political Economy, Elsevier, vol. 18(1), pages 177-192, March.
  6. Duncan, Greg J & Stafford, Frank P, 1980. "Do Union Members Receive Compensating Wage Differentials?," American Economic Review, American Economic Association, vol. 70(3), pages 355-71, June.
  7. Rowthorn, Robert, 1999. "Unemployment, Wage Bargaining and Capital-Labour Substitution," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 413-25, July.
  8. Addison, John T & Chilton, John B, 1998. "Self-Enforcing Union Contracts: Efficient Investment and Employment," The Journal of Business, University of Chicago Press, vol. 71(3), pages 349-69, July.
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