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 unionized sector extend beyond this sector, which seems to be a characteristic feature of continental European labour markets. Conditions are identified under which firms and unions have a commonality of interest in extending coverage of a minimum wage to the non-unionized 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 unionized sector to impose a market clearing wage on the non-unionized sector. This suggests that coverage extension can increase welfare.
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Bibliographic InfoPaper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 97-13.
Length: 26 pages
Date of creation: Nov 1997
Date of revision:
Publication status: Published in: European Economic Review 44(1) 2000, 181-200
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coverage extension; two-stage bargaining; minimum wages; dual labour market; centralization;
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, . "Two-Stage Bargaining with Coverage Extension in a Dual Labour Market," EPRU Working Paper Series 97-28, Economic Policy Research Unit (EPRU), 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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