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Abstract

In this paper we study interactions between labor and product markets, in an imperfectly competitive industry with centralized wage bargaining. Firms jointly bargain with the union over wages and then compete in prices or quantities. We show that the negotiated wage is independent of the number of firms, the degree of substitutability of firms' products, and the type of market competition, in a broad c1ass of industry specifications, including the standard syrnmetric linear demand system-linear one factor (labor) technology. This result is robust to various union objectives. Thus, unions are better-off as the market becomes more competitive because aggregate! employment increases. Finally,. motivated by the wage independence property, we propose that the bargained wage in a Bertrand homogenous market be taken as the limit of that of a differentiated market as the degree of substitutability goes to one.

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Bibliographic Info

Paper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/3964.

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Handle: RePEc:ner:carlos:info:hdl:10016/3964

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Related research

Keywords: Oligopoly; Trade Unions; Centralized Bargaining; Wage Structure;

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1. John H. Pencavel, 1982. "The Trade-Off between Wages and Employment in Trade Union Objectives," NBER Working Papers 0870, National Bureau of Economic Research, Inc.
   
   • 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.
2. Booth, Alison L, 1984. "A Public Choice Model of Trade Union Behaviour and Membership," Economic Journal, Royal Economic Society, vol. 94(376), pages 883-98, December.
3. Dixit, Avinash K., 1978. "A Model of Duopoly Suggesting a Theory of Entry Barriers," The Warwick Economics Research Paper Series (TWERPS) 125, University of Warwick, Department of Economics.
   
   • Avinash Dixit, 1979. "A Model of Duopoly Suggesting a Theory of Entry Barriers," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 20-32, Spring.
4. Hirsch, Barry T., 1990. "Market structure, union rent seeking, and firm profitability," Economics Letters, Elsevier, vol. 32(1), pages 75-79, January.
5. Yang, Xiaokai & Heijdra, Ben J, 1993. "Monopolistic Competition and Optimum Product Diversity: Comment," American Economic Review, American Economic Association, vol. 83(1), pages 295-301, March.
6. d ASPREMONT, Claude & DOS SANTOS FERREIRA, Rodolphe & GERARD-VARET, Louis-André, 1994. "On the Dixit-Stiglitz Model of Monopolistic Competition as Enforcement Mechanisms," CORE Discussion Papers 1994067, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
7. Pugel, Thomas A, 1980. "Profitability, Concentration and the Interindustry Variation in Wages," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 248-53, May.
8. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
   
   • Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
9. repec:fth:prinin:247 is not listed on IDEAS
10. David Card, 1996. "Deregulation and Labor Earnings in the Airline Industry," NBER Working Papers 5687, National Bureau of Economic Research, Inc.
    
    • David Card, 1989. "Deregulation and Labor Earnings in the Airline Industry," Working Papers 627, Princeton University, Department of Economics, Industrial Relations Section..
11. William T. Dickens & Lawrence F. Katz, 1987. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
12. Barry T. Hirsch & Robert A. Connolly, 1987. "Do unions capture monopoly profits?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 41(1), pages 118-136, October.
13. Stewart, M.B., 1989. "Union Wage Differentials, Product Market Influences And The Division Of Rents," The Warwick Economics Research Paper Series (TWERPS) 323, University of Warwick, Department of Economics.
    
    • Stewart, Mark B, 1990. "Union Wage Differentials, Product Market Influences and the Division of Rents," Economic Journal, Royal Economic Society, vol. 100(403), pages 1122-37, December.
14. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
15. Clark, Kim B, 1984. "Unionization and Firm Performance: The Impact on Profits, Growth, and Productivity," American Economic Review, American Economic Association, vol. 74(5), pages 893-919, December.

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