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Insider Power In Wage Determination

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Author Info

  • BLANCHFLOWER, D.
  • OSWALD, A.
  • GARRETT, M.

Abstract

The paper argues that wage determination is best seen as a kind of rent sharing in which workers' bargaining power is influenced by conditions in the external labour market. It uses British establishment data from 1984 to show that pay depends upon a blend of insider pressure (including the employer's financial performance and oligopolistic position) and outsider pressure (including external wages and unemployment). Lester's feasible 'range' of wages appears typically to be between 8% and 22% of pay. Estimates of the unemployment elasticity of the wage lie in a narrow band around -0.1.

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Bibliographic Info

Paper provided by London School of Economics - Centre for Labour Economics in its series Papers with number 319.

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Length: 45 pages
Date of creation: 1988
Date of revision:
Handle: RePEc:fth:lseple:319

Contact details of provider:
Postal: LONDON SCHOOL OF ECONOMICS AND POLITICAL SCIENCE, CENTER FOR LABOUR ECONOMICS, HOUGHTON STREET LONDON WC2A 2AE ENGLAND.
Phone: +44 (020) 7405 7686
Web page: http://www.lse.ac.uk/
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Related research

Keywords: labour market ; collective bargaining ; wages;

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References

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  1. Nickell, Stephen J & Wadhwani, Sushil, 1990. "Insider Forces and Wage Determination," Economic Journal, Royal Economic Society, vol. 100(401), pages 496-509, June.
  2. Holmlund, B. & Skedinger, P., 1988. "Wage Bargaining And Wage Drift: Evidence From The Swedish Wood Industry," Papers 419, Stockholm - International Economic Studies.
  3. Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
  4. David G. Blanchflower & Andrew J. Oswald & Mario D. Garrett, 1989. "Insider Power in Wage Determination," NBER Working Papers 3179, National Bureau of Economic Research, Inc.
  5. Carruth, Alan & Oswald, Andrew, 1987. "Wage Inflexibility in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 59-78, February.
  6. Stewart, Mark B, 1987. "Collective Bargaining Arrangements, Closed Shops and Relative Pay," Economic Journal, Royal Economic Society, vol. 97(385), pages 140-56, March.
  7. Nash, John, 1953. "Two-Person Cooperative Games," Econometrica, Econometric Society, vol. 21(1), pages 128-140, April.
  8. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  9. Shaked, Avner & Sutton, John, 1984. "Involuntary Unemployment as a Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 52(6), pages 1351-64, November.
  10. Solow, Robert M, 1985. " Insiders and Outsiders in Wage Determination," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 411-28.
  11. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
  12. Johnson, George E, 1990. "Work Rules, Featherbedding, and Pareto-optimal Union-Management Bargaining," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S237-59, January.
  13. Lindbeck, Assar & Snower, Dennis J., 1987. "Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach," CEPR Discussion Papers 196, C.E.P.R. Discussion Papers.
  14. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
  15. Rowlatt, Penelope A, 1987. "A Model of Wage Bargaining," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(4), pages 347-72, November.
  16. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
  17. Holmlund, B. & Skedinger, P., 1988. "Wage Bargaining And Wage Drift: Evidence From Swedish Wood Industry," Papers 1988g, Uppsala - Working Paper Series.
  18. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis And The European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
  19. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  20. Oswald, Andrew J & Turnbull, Peter J, 1985. "Pay and Employment Determination in Britain: What Are Labour," Oxford Review of Economic Policy, Oxford University Press, vol. 1(2), pages 80-97, Summer.
  21. Gregory, R G, 1986. "Wages Policy and Unemployment in Australia," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S53-74, Supplemen.
  22. Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-84, December.
  23. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  24. Alan B. Krueger & Lawrence H. Summers, 1986. "Reflections on the Inter-Industry Wage Structure," NBER Working Papers 1968, National Bureau of Economic Research, Inc.
  25. Mcconnell, S., 1988. "Strikes, Wages And Private Information," Papers 10, Princeton, Woodrow Wilson School - Discussion Paper.
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