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A Union-Oligopoly Model of Endogenous Discrimination:Should it be wage discrimination taxed or discriminated employment subsidized?

Author

Listed:
  • Minas Vlassis

    (Department of Economics, University of Crete, Greece)

  • Nick Drydakis

    (Department of Economics - University of Crete, Greece)

Abstract

In 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.

Suggested Citation

  • Minas Vlassis & Nick Drydakis, "undated". "A Union-Oligopoly Model of Endogenous Discrimination:Should it be wage discrimination taxed or discriminated employment subsidized?," Working Papers 0614, University of Crete, Department of Economics.
    • Handle: RePEc:crt:wpaper:0614
    as

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    References listed on IDEAS

    as
    1. Timothy Hinks & Duncan Watson, 2001. "A multinomial logit nondiscriminatory approach to estimating racial wage and occupational discrimination," Applied Economics, Taylor & Francis Journals, vol. 33(5), pages 605-612.
    2. Swinton, David H, 1977. "A Labor Force Competition Theory of Discrimination in the Labor Market," American Economic Review, American Economic Association, vol. 67(1), pages 400-404, February.
    3. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
    4. Emmanuel Petrakis & Minas Vlassis, 2004. "Endogenous wage bargaining institutions in oligopolistic sectors," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 55-73, July.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Unions; Oligopoly; Discriminatory Wage Contracts; Antidiscrimination Policy;
    All these keywords.

    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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