Two-Stage Bargaining with Coverage Extension in a Dual Labour Market
AbstractThis paper studies two-stage bargaining in a simple general equilibrium model with a dual labour market. We analyse the case where agreements reached at the central level in the union sector extend beyond this sector. Conditions are identified under which firms and unions have a commonality of interest in extending coverage of a minimum wage to the non-union sector of the economy. In many countries, labour markets comprise a primary sector with high non-market clearing wages and job queues, and a secondary sector with market clearing. The latter arises endogenously in our model: it is optimal for the union sector to impose a market clearing wage on the non-union sector. This suggests that coverage extension can increase welfare.
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Bibliographic InfoPaper provided by Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics in its series EPRU Working Paper Series with number 97-28.
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Other versions of this item:
- Roberts, Mark A. & Staehr, Karsten & Tranaes, Torben, 2000. "Two-stage bargaining with coverage extension in a dual labour market," European Economic Review, Elsevier, vol. 44(1), pages 181-200, January.
- Mark A. Roberts & Karsten Stæhr & Torben Tranæs, 1997. "Two-Stage Bargaining with Coverage Extension in a Dual Labour Market," Discussion Papers 97-13, University of Copenhagen. Department of Economics.
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
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