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Centralised Labour Market Negotiations

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  • Julia Müller
  • Thorsten Upmann

Abstract

This paper contributes to the analysis of central vs. decentral (firm-level) labour market negotiations. We argue that during negotiations on a central scale employers and employees plausibly take output market effects into account, while they behave competitively during firm-level negotiations. Assuming that in both cases the labour market conflict is settled efficiently according to the familiar Nash bargaining solution, we show that central negotiations lead to a lower employment level but to a higher wage rate, when compared with local labour market bargains. While this is an important theoretical result in its own, it has important effects for both empirical labour market research and labour market policies. Also, this result counters the critique that efficient negotiations result in employment levels exceeding the competitive level.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2013/wp-cesifo-2013-11/cesifo1_wp4470.pdf
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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4470.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4470

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Related research

Keywords: central labour market negotiations; efficient bargains; Nash bargaining solution; involuntary unemployment; endogenous output price; Walrasian market clearing;

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References

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  1. Jean-François Fagnart & Marc Germain, 1997. "Investment and technological choice in a right-to-manage model," Journal of Economics, Springer, vol. 66(3), pages 223-247, October.
  2. Cripps, Martin W, 1997. "Bargaining and the Timing of Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 527-46, August.
  3. Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
  4. Davidson, Carl, 1988. "Multiunit Bargaining in Oligopolistic Industries," Journal of Labor Economics, University of Chicago Press, vol. 6(3), pages 397-422, July.
  5. Sen, Anindya & Dutt, Amitava Krishna, 1995. "Wage bargaining, imperfect competition and the markup: Optimizing microfoundations," Economics Letters, Elsevier, vol. 48(1), pages 15-20, April.
  6. Creedy, John & McDonald, Ian M, 1991. "Models of Trade Union Behaviour: A Synthesis," The Economic Record, The Economic Society of Australia, vol. 67(199), pages 346-59, December.
  7. Emmanuel Petrakis & Minas Vlassis, 2004. "Endogenous wage bargaining institutions in oligopolistic sectors," Economic Theory, Springer, vol. 24(1), pages 55-73, 07.
  8. Hoel, Michael, 1990. " Local versus Central Wage Bargaining with Endogenous Investments," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(3), pages 453-69.
  9. Dowrick, S., 1992. "Enterprise Bargaining, Union Structure and Wages," Papers 242, Australian National University - Department of Economics.
  10. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  11. Clark, Kim B, 1984. "Unionization and Firm Performance: The Impact on Profits, Growth, and Productivity," American Economic Review, American Economic Association, vol. 74(5), pages 893-919, December.
  12. Minas Vlassis, 2003. "Wage Centralization and the Scope of Firm-Union Bargaining: 'Efficient Bargains' or 'Labour Demand'?," Manchester School, University of Manchester, vol. 71(3), pages 308-329, 06.
  13. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-42, December.
  14. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  15. Dobson, Paul W, 1997. "Union-Firm Interaction and the Right to Manage," Bulletin of Economic Research, Wiley Blackwell, vol. 49(3), pages 213-29, July.
  16. Thorsten Upmann & Julia M�ller, 2013. "The Structure of Firm-Specific Labour Unions," Tinbergen Institute Discussion Papers 13-080/I, Tinbergen Institute.
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