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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.

Suggested Citation

  • Julia Müller & Thorsten Upmann, 2013. "Centralised Labour Market Negotiations," CESifo Working Paper Series 4470, CESifo.
    • Handle: RePEc:ces:ceswps:_4470
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    References listed on IDEAS

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    More about this item

    Keywords

    central labour market negotiations; efficient bargains; Nash bargaining solution; involuntary unemployment; endogenous output price; Walrasian market clearing;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition

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