Trade Unions and the Efficiency of the Natural Rate of Unemployment
AbstractDecentralized wage setting in search equilibrium models is inefficient because the meeting firm and worker ignore the dependence of job-matching probabilities on the number of firms and worker engaged in search. This paper investigates whether risk-neutral monopolistic unions will have an incentive to internalize this externality. The author finds that the externality will be internalized only if the union's policy is chosen by unemployed persons. If employed persons influence union policy, both the union wage and unemployment will be too high. A tax on the union wage, combined with an employment subsidy to firms, can correct this inefficiency. Copyright 1986 by University of Chicago Press.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Labor Economics.
Volume (Year): 4 (1986)
Issue (Month): 4 (October)
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Web page: http://www.journals.uchicago.edu/JOLE/
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- Xiaoming Cai & Pieter A. Gautier & Makoto Watanabe, 2012.
"Collective versus Decentralized Wage Bargaining and the Efficient Allocation of Resources,"
Tinbergen Institute Discussion Papers
12-086/3, Tinbergen Institute.
- Cai, Xiaoming & Gautier, Pieter A. & Teulings, Coen N. & Watanabe, Makoto, 2014. "Collective versus decentralized wage bargaining and the efficient allocation of resources," Labour Economics, Elsevier, vol. 26(C), pages 34-42.
- Decreuse, Bruno, 2003.
"Choosy search and the mismatch of talents,"
3636, University Library of Munich, Germany, revised Feb 2007.
- Delacroix, Alain, 2006. "A multisectorial matching model of unions," Journal of Monetary Economics, Elsevier, vol. 53(3), pages 573-596, April.
- Priya Ranjan, 2012.
"Offshoring, Unemployment, and Wages: The Role of Labor Market Institutions,"
121302, University of California-Irvine, Department of Economics.
- Ranjan, Priya, 2013. "Offshoring, unemployment, and wages: The role of labor market institutions," Journal of International Economics, Elsevier, vol. 89(1), pages 172-186.
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