A Union-Oligopoly Model of Endogenous Discrimination:Should it be wage discrimination taxed or discriminated employment subsidized?
AbstractIn the context of a homogenous good industry with Cournot rivalry and technological asymmetries among firms, equally skilled workers can be grouped according to their different reservation wages. Under decentralized firm-union bargaining, we show that unions may offer to firms the option to discriminate wages across such groups of employees and, by that, to achieve cost sub-additivity in the equilibrium. We subsequently propose that to combat the emerging wage discrimination a benevolent policy maker may activate either taxation, or subsidization, policy. Interestingly, while the former policy always entails a welfare loss, a welfare gain may emerge under the latter policy, relative to the no policy-wage discrimination status quo. Thus our findings suggest that the E.U- antidiscrimination directives may prove to be effective on both egalitarian and efficiency grounds.
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Bibliographic InfoPaper provided by University of Crete, Department of Economics in its series Working Papers with number 0614.
Length: 26 pages
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Unions; Oligopoly; Discriminatory Wage Contracts; Antidiscrimination Policy;
Find related papers by JEL classification:
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
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