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Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach

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Author Info
Lindbeck, Assar
Snower, Dennis J.

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Abstract

We present a theory of involuntary unemployment which explains why the unemployed workers ("outsiders") are unable or unwilling to find jobs even though they are prepared to work for less than the prevailing wages of incumbent workers ("insiders"). The outsiders do not underbid the insiders since, were they to do so, the insiders would withdraw cooperation from them and make their work unpleasant (i.e. "harass" them), thereby reducing the productivity and increasing the reservation wages of the underbidders. The resulting labor turnover costs create economic rent which the insiders tap in wage-setting and, as a result, involuntary unemployment may arise.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 196.

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Date of creation: Sep 1987
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Handle: RePEc:cpr:ceprdp:196

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Related research
Keywords: Cooperation; Harassment; Insiders; Outsiders; Turnover; Unemployment; Wages;

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  1. John W. Budd & Josef Konings & Matthew J. Slaughter, 2002. "International Rent Sharing in Multinational Firms," NBER Working Papers 8809, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  2. Gil S. Epstein & Ira N Gang, 2006. "Migrants, Ethnicity and Strategic Assimilation," Departmental Working Papers 200630, Rutgers University, Department of Economics. [Downloadable!]
  3. David G. Blanchflower & Andrew J. Oswald & Mario D. Garrett, 1990. "Insider Power in Wage Determination," NBER Working Papers 3179, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. John W. Budd & Jozef Konings & Matthew J. Slaughter, 2002. "Wages and International Rent Sharing in Multinational Firms," William Davidson Institute Working Papers Series 522, William Davidson Institute at the University of Michigan Stephen M. Ross Business School. [Downloadable!]
    Other versions:
  5. Coe, David T., 1989. "Structural Determinants of the Natural Rate of Unemployment in Canada," MPRA Paper 8623, University Library of Munich, Germany. [Downloadable!]
  6. Epstein, Gil S. & Gang, Ira N., 2008. "Ethnicity, Assimilation and Harassment in the Labor Market," IZA Discussion Papers 3591, Institute for the Study of Labor (IZA). [Downloadable!]
  7. Michael Dobbie, 2004. "Hysteresis and Insider-Outside Theory - A Literature Review," Research Papers 0408, Macquarie University, Department of Economics. [Downloadable!]
  8. Ernst Fehr & Georg Kirchsteiger, 2003. "Insider Power, Wage Discrimination, and Fairness," Labor and Demography 0305003, EconWPA. [Downloadable!]
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  9. Anabela Carneiro & Pedro Portugal, 2006. "Market Power, Dismissal Threat and Rent Sharing: The Role of Insider and Outsider Forces in Wage Bargaining," IZA Discussion Papers 2102, Institute for the Study of Labor (IZA). [Downloadable!]
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  10. Ernst Fehr & Urs Fischbacher, . "Why Social Preferences Matter - The Impact of Non-Selfish Motives on Competition," IEW - Working Papers iewwp084, Institute for Empirical Research in Economics - IEW. [Downloadable!]
  11. Mari Rege and Kjetil Telle, 2001. "An Experimental Investigation of Social Norms," Discussion Papers 310, Research Department of Statistics Norway. [Downloadable!]
  12. Kai-Uwe Kuuhn & A. Jorge Padilla, 2002. "Union Power, Replacement and Labour Market Dynamics," Economic Journal, Royal Economic Society, vol. 112(479), pages 317-343, April. [Downloadable!] (restricted)
  13. Harry J. Holzer & Edward B. Montgomery, 1990. "Asymmetries and Rigidities in Wage Adjustments by Firms," NBER Working Papers 3274, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Truman F. Bewley, 2002. "Fairness, Reciprocity, and Wage Rigidity," Cowles Foundation Discussion Papers 1383, Cowles Foundation, Yale University. [Downloadable!]
  15. Epstein, Gil S. & Gang, Ira N., 2004. "Ethnic Networks and International Trade," IZA Discussion Papers 1232, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  16. David G. Blanchflower, 1991. "Fear, Unemployment and Pay Flexibility," NBER Working Papers 3365, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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