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Self-Enforcing Union Contracts: Efficient Investment and Employment

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  • Addison, John T
  • Chilton, John B

Abstract

Carliss Baldwin (1983) asks whether a firm can credibly deter union opportunism that would lead to underinvestment. The authors show that the punishments Baldwin considers credible exclude tougher threats that only have the appearance of being self-destructive. If the firm's discount factor is sufficiently close to one, union opportunism can indeed be deterred. Moreover, the authors show that given the firm's discount factor, a shorter lifetime of capital does not necessarily promote efficiency. Although, as Baldwin emphasizes, it does enhance the firm's ability to punish union opportunism, it also creates adverse incentives for the firm to engage in opportunistic employment cuts. Copyright 1998 by University of Chicago Press.

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Bibliographic Info

Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 71 (1998)
Issue (Month): 3 (July)
Pages: 349-69

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Handle: RePEc:ucp:jnlbus:v:71:y:1998:i:3:p:349-69

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Web page: http://www.journals.uchicago.edu/JB/

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Cited by:
  1. John T. Addison & Thorsten Schank & Claus Schnabel & Joachim Wagner, 2007. "Do Works Councils Inhibit Investment?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(2), pages 187-203, January.
  2. Gavin Cameron & Chris Wallace, 2002. "Macroeconomic Performance in the Bretton Woods Era, And After," Economics Series Working Papers 130, University of Oxford, Department of Economics.
  3. Damiaan Persyn, 2009. "Union wage demands with footloose firms," Vives discussion paper series 3, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, Vives.
  4. Menezes-Filho, Naercio & Van Reenen, John, 2003. "Unions and Innovation: A Survey of the Theory and Empirical Evidence," CEPR Discussion Papers 3792, C.E.P.R. Discussion Papers.
  5. Barry T. Hirsch, 2008. "Sluggish Institutions in a Dynamic World: Can Unions and Industrial Competition Coexist?," Journal of Economic Perspectives, American Economic Association, vol. 22(1), pages 153-176, Winter.
  6. Addison, John T. & Heywood, John S. & Wei, Xiangdong, 2001. "Unions and Plant Closings in Britain: New Evidence from the 1990/98 WERS," IZA Discussion Papers 352, Institute for the Study of Labor (IZA).
  7. Addison, John T. & Bellmann, Lutz & K├Âlling, Arnd, 2002. "Unions, Works Councils and Plant Closings in Germany," IZA Discussion Papers 474, Institute for the Study of Labor (IZA).
  8. Persyn, Damiaan, 2013. "Union wage demands with footloose firms and agglomeration forces," Regional Science and Urban Economics, Elsevier, vol. 43(1), pages 142-150.
  9. Biswas, Tapan & McHardy, Jolian, 2007. "On the incentives to increase input efficiency under monopoly trade unions," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 657-669, April.
  10. Addison, John T. & Teixeira, Paulino & Evers, Katalin & Bellmann, Lutz, 2013. "Collective Bargaining and Innovation in Germany: Cooperative Industrial Relations?," IZA Discussion Papers 7871, Institute for the Study of Labor (IZA).

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