A Reverse Holdup Problem: When workers’ lack of bargaining power slows economic adjustments
AbstractIn a model of horizontal matching on the labor market, we show that increasing workers’ bargaining power may increase some employers’ incentive to switch to new production activities. In particular, this could lead to (i) higher wages, (ii) more jobs, (iii) better jobs and (iv) higher profits. Paradoxically, the median voter may object to the economic adjustments because search costs could cut the surplus for a majority of workers, even when it creates jobs for the other ones and increases aggregate surplus.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9475.
Date of creation: May 2013
Date of revision:
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Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-28 (All new papers)
- NEP-LAB-2013-09-28 (Labour Economics)
- NEP-LMA-2013-09-28 (Labor Markets - Supply, Demand, & Wages)
- NEP-MIC-2013-09-28 (Microeconomics)
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