Overtime pay premiums in a unionized oligopoly
AbstractThis paper studies how a high overtime wage rate and a low labor stock may be used as commitment devices by price-setting firms. We show that high overtime pay premiums may both decrease and increase equilibrium employment. If an employment-oriented union or the firm itself sets the overtime wage, then the overtime wage premium will be high enough to ensure that no overtime is used in equilibrium. If the overtime wage is set by a sufficiently wage-oriented union, however, overtime will be used in equilibrium, and employment is substantially lower. Thus the authorities may be able to increase employment if it can make a union act in a less wage-oriented manner. We show that this can be done by setting a minimum overtime pay premium. Minimum wage regulation could have the opposite effect.
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Bibliographic InfoPaper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 22/02.
Length: 25 pages
Date of creation: 09 Dec 2002
Date of revision:
Contact details of provider:
Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Web page: http://www.uib.no/econ/en
More information through EDIRC
Overtime; Bertrand competition; unionization; regulation;
Find related papers by JEL classification:
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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