Institutions, Bargaining Power and Labor Shares
AbstractWe use a static framework characterized by both moral hazard and holdup problems. In the model the optimal allocation of bargaining power balances these frictions. We examine the impact of improved monitoring on that optimal allocation and its impact upon effort, investment, profits and rents. The model’s predictions are consistent with the recent evolution of labor shares, wages per efficiency units and the ratio of labor in efficiency units to capital in several OECD countries. The model suggests further that improvement in monitoring may also play a key role in understanding opposition to institutional reforms in the labor market.
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Bibliographic InfoPaper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2006-009.
Length: 26 pages
Date of creation: Jan 2006
Date of revision:
moral hazard; hold up; bargaining; labor share;
Find related papers by JEL classification:
- D02 - Microeconomics - - General - - - Institutions: Design, Formation, and Operations
- D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
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