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The Effects of Union Wage-Settings on Firms' Production Factor Decisions

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Author Info
Heshmati, Almas () (WIDER, United Nations University and IZA Bonn)
Haouas, Ilham (TEAM, Université Paris I Panthéon-Sorbonne)

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Abstract

This study is concerned with the development of a theoretical model and its empirical application to the estimation of the interaction between firms and trade union in determining wages and employment. The focus is on analyzing the effects of unions’ demands on the firm’s choice of factors of production. In a two-step process the union and firm determine wages and capital stock, conditional on which the firm decides on production factors of employment, working hours and capital operating time. We suggest the use of a panel data approach applied to manufacturing data. A dynamic model is specified in which the optimal levels of the variables of interest and the speed of their adjustments are modeled in terms of observable policy variables.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 689.

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Length: 13 pages
Date of creation: Jan 2003
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Handle: RePEc:iza:izadps:dp689

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Related research
Keywords: wage bargaining; employment; capital stock; work hours; capital operating time; manufacturing; panel data;

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Find related papers by JEL classification:
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
D21 - Microeconomics - - Production and Organizations - - - Firm Behavior
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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References listed on IDEAS
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.:
  1. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June. [Downloadable!] (restricted)
  2. Kumbhakar, Subal C. & Heshmati, Almas & Hjalmarsson, Lennart, 2000. "How Fast Do Banks Adjust? A Dynamic Model of Labor-Use with an Application to Swedish Banks," Working Paper Series in Economics and Finance 411, Stockholm School of Economics, revised Nov 2001.
  3. Holm, Pasi & Honkapohja, Seppo & Koskela, Erkki, 1994. "A monopoly-union model of wage determination with capital and taxes: An empirical application to the Finnish manufacturing," European Economic Review, Elsevier, vol. 38(2), pages 285-303, February. [Downloadable!] (restricted)
  4. Anderson, Simon P & Devereux, Michael, 1988. " Trade Unions and the Choice of Capital Stock," Scandinavian Journal of Economics, Blackwell Publishing, vol. 90(1), pages 27-44.
    Other versions:
  5. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Blackwell Publishing, vol. 87(2), pages 160-93.
  6. Calmfors, Lars & Horn, Henrik, 1985. " Classical Unemployment, Accommodation Policies and Adjustment of Real Wages," Scandinavian Journal of Economics, Blackwell Publishing, vol. 87(2), pages 234-61.
  7. Dertouzos, James N & Pencavel, John H, 1981. "Wage and Employment Determination under Trade Unionism: The International Typographical Union," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1162-81, December. [Downloadable!] (restricted)
  8. Kidd, David P & Oswald, Andrew J, 1987. "A Dynamic Model of Trade Union Behaviour," Economica, London School of Economics and Political Science, vol. 54(215), pages 355-65, August. [Downloadable!] (restricted)
  9. Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-45, November. [Downloadable!] (restricted)
  10. Almas Heshmati, 2003. "Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries," Journal of Economic Surveys, Blackwell Publishing, vol. 17(1), pages 79-112, February. [Downloadable!] (restricted)
    Other versions:
  11. Horn, Henrik & Svensson, Lars E O, 1986. "Trade Unions and Optimal Labour Contracts," Economic Journal, Royal Economic Society, vol. 96(382), pages 323-41, June. [Downloadable!] (restricted)
  12. Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Blackwell Publishing, vol. 87(2), pages 197-225.
  13. Pencavel, John H, 1984. "The Tradeoff between Wages and Employment in Trade Union Objectives," The Quarterly Journal of Economics, MIT Press, vol. 99(2), pages 215-31, May. [Downloadable!] (restricted)
    Other versions:
  14. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December. [Downloadable!] (restricted)
  15. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Almas Heshmati, 2007. "Labor Market Policy Options of the Kurdistan Regional Government," IZA Discussion Papers 3247, Institute for the Study of Labor (IZA). [Downloadable!]
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