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On the Foundations of Wage Bargaining

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  • Manzini, Paola
  • Snower, Dennis J.

Abstract

This paper provides strategic foundations for the insight that the bargaining power of employees depends on the firm’s labour turnover costs. The analysis shows how these costs determine the firm’s degree of substitutability between two sets of wage negotiations: (i) those the firm conducts with its incumbent employees; and (ii) the alternative negotiations it could conduct with new job seekers. In this context, labour turnover costs not only influence the negotiators’ alternatives to bargaining (i.e. the negotiators’ fall-back positions and outside options); they affect the nature of the bargaining process itself. This approach leads to a new theory of wage determination.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1514.

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Date of creation: Nov 1996
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Handle: RePEc:cpr:ceprdp:1514

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Related research

Keywords: Bargaining; Insider-outsider; Labour Turnover Costs; Outside Option;

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Cited by:
  1. Díaz-Vázquez, Pilar & Snower, Dennis J., 2003. "Can insider power affect employment?," Open Access Publications from Kiel Institute for the World Economy 2992, Kiel Institute for the World Economy (IfW).
  2. Pilar Díaz-Vázquez & Dennis J. Snower, 2003. "Can Insider Power Affect Employment?," German Economic Review, Verein für Socialpolitik, vol. 4(2), pages 139-150, 05.
  3. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter.

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