Unions: Rent Extractors or Creators?
AbstractThis paper proposes a model of workplace-specific unions that integrates two (conflicting) views of what unions do: one that unions mainly engage in rent extraction, the other that unions mainly engage in rent creation by providing agency services that increase workplace productivity. In our model, the union leadership makes a choice between the two types of activities, and we demonstrate why it is optimal to engage in both: rent extraction increases the bargained wage rate, rent creation secures higher employment. More importantly, the choice between the two activities depends systematically on the economic and regulatory environment in which the union operates. Unions operating in an environment of intense market competition are mainly engaged in rent extraction. Our model thus suggests that the economic and regulatory environment is an important determinant of “what unions do”, and that changes/differences in this environment can explain changes/differences in union behaviour across time and space.
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Bibliographic InfoPaper provided by Faculty of Economics, University of Cambridge in its series Cambridge Working Papers in Economics with number 0236.
Date of creation: Oct 2002
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Web page: http://www.econ.cam.ac.uk/index.htm
unions; rent creation; rent extraction; product market competition;
Find related papers by JEL classification:
- J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
- L5 - Industrial Organization - - Regulation and Industrial Policy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-11-28 (All new papers)
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