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Collective Bargaining and the Division of the Value of the Enterprise

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  • John M. Abowd

Abstract

The enterprise (firm) is modeled as a collection of formal and informal contracts providing various factors of production with claims on the income stream in consideration of assets or services supplied to the enterprise. The strongly efficient bargaining model implies that the division of the quasi-rents will result in dollar for dollar exchanges of wealth between the union members and the shareholders. The leading inefficient bargaining models do not imply such tradeoffs in general. The model is tested by considering contract settlements during the years 1976 to 1982 as recorded by the Bureau of National Affairs in Collective Bargaining Negotiations and Contracts. Security price data for the firms were merged with these bargaining unit level settlement data. The tests provide substantial confirmation of the dollar for dollar wealth tradeoff between union members and shareholders.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2137.

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Date of creation: Jan 1987
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Publication status: published as "The Effect of Wage Bargains on the Stock Market Value of the Firm" From The American Economic Review, Vol. 79, No. 4, pp. 774-800, (September 1989)
Handle: RePEc:nbr:nberwo:2137

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Cited by:
  1. John M. Abowd & Joseph S. Tracy, 1988. "Market Structure, Strike Activity, and Union Wage Settlements," NBER Working Papers 2595, National Bureau of Economic Research, Inc.
  2. repec:fth:prinin:232 is not listed on IDEAS
  3. Johnson, George E, 1990. "Work Rules, Featherbedding, and Pareto-optimal Union-Management Bargaining," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages S237-59, January.
  4. David Card, 1988. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," Working Papers 612, Princeton University, Department of Economics, Industrial Relations Section..
  5. Janet Currie Neelin, 1989. "What Do (Public Sector) Unions Do? Wage and Employment Determination Among Ontario Public School Teachers," UCLA Economics Working Papers 542, UCLA Department of Economics.
  6. Dorothee Schneider, 2011. "The Labor Share: A Review of Theory and Evidence," SFB 649 Discussion Papers SFB649DP2011-069, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
  7. repec:fth:prinin:228 is not listed on IDEAS

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