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Market Structure, Strike Activity, and Union Wage Settlements

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  • John M. Abowd
  • Joseph S. Tracy

Abstract

We attempt a synthesis of the industrial relations market structure hypothesis with the modern asymmetric information theory of wage and strike outcomes The industrial relations literature contains a variety of arguments indicating that wage settlements should be positively related to the degree of product market sales concentration and the degree of product market coverage by the union. An asymmetric information bargaining model is specified that relates these same variables to strike probabilities as well as wage settlements. Our empirical analysis is conducted for :he periods from 1970-1380 (strikes) and 1976-1980 (wages). We find that the relation between trade-adjusted sales concentration and wage settlements is positive at low levels of concentration but negative at high levels of concentration. The relation is always negative for strike probabilities. We also find that the relation between the trade-adjusted percent of the product market covered by the same union and the percentage covered by other union are positively related to both wage settlements and strike probabilities. Our empirical analysis includes a rich set of controls including unrestricted time and industry effects, which do not affect the major conclusions.

Suggested Citation

  • 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.
    • Handle: RePEc:nbr:nberwo:2595
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    References listed on IDEAS

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    1. John Abowd, 1987. "Collective Bargaining and the Division of the Value of the Enterprise," Working Papers 598, Princeton University, Department of Economics, Industrial Relations Section..
    2. John E. Kwoka Jr., 1983. "Monopoly, Plant, and Union Effects on Worker Wages," ILR Review, Cornell University, ILR School, vol. 36(2), pages 251-257, January.
    3. repec:fth:prinin:218 is not listed on IDEAS
    4. John M. Abowd, 1987. "Collective Bargaining and the Division of the Value of the Enterprise," NBER Working Papers 2137, National Bureau of Economic Research, Inc.
    5. Tracy, Joseph S, 1986. "An Investigation into the Determinants of U.S. Strike Activity," American Economic Review, American Economic Association, vol. 76(3), pages 423-436, June.
    6. Tracy, Joseph S, 1987. "An Empirical Test of an Asymmetric Information Model of Strikes," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 149-173, April.
    7. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 40-87, June.
    8. Harold M. Levinson, 1967. "Unionism, Concentration, and Wage Changes: Toward a Unified Theory," ILR Review, Cornell University, ILR School, vol. 20(2), pages 198-205, January.
    9. Arthur M. Ross & William Goldner, 1950. "Forces Affecting the Interindustry Wage Structure," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 64(2), pages 254-281.
    10. S. Rosen, 1969. "Trade Union Power, Threat Effects and the Extent of Organization," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 36(2), pages 185-196.
    11. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, March.
    12. Freeman, Richard B & Medoff, James L, 1981. "The Impact of the Percentage Organized on Union and Nonunion Wages," The Review of Economics and Statistics, MIT Press, vol. 63(4), pages 561-572, November.
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    Cited by:

    1. Mauleon, Ana & Vannetelbosch, Vincent, 2010. "Market integration and strike activity," Journal of International Economics, Elsevier, vol. 81(1), pages 154-161, May.
    2. Mauleon, Ana & Vannetelbosch, Vincent J., 2003. "Market competition and strike activity," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 737-758, May.
    3. Arturo Alegría & Fernando Coloma, 1992. "Huelga: Enfoques Teóricos, Análisis del Caso Chileno y Evidencia Internacional," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 29(86), pages 55-98.
    4. Arijit Mukherjee, 2011. "Product market competition, external economies of scale and unionized wage," Discussion Papers 11/14, University of Nottingham, School of Economics.
    5. Stewart, Mark B, 1990. "Union Wage Differentials, Product Market Influences and the Division of Rents," Economic Journal, Royal Economic Society, vol. 100(403), pages 1122-1137, December.
    6. James McDonald & Harry Bloch, 1999. "The Spillover Effects of Industrial Action on Firm Profitability," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(2), pages 183-200, September.
    7. Fernando Coloma & Arturo Alegría, "undated". "Huelga: Enfoques Teóricos y Efectos Económicos de Disfrutar Regulaciones," Documentos de Trabajo 141, Instituto de Economia. Pontificia Universidad Católica de Chile..
    8. Cramton, Peter C & Tracy, Joseph S, 1994. "The Determinants of U.S. Labor Disputes," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 180-209, April.

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