Bargaining with a Shared Interest: The Impact of Employee Stock Ownership Plans on Labor Disputes
AbstractBargaining often occurs between parties with some shared interest. Partnerships, joint ventures, and cross ownership are examples. We extend standard bargaining models to allow for joint ownership. Joint ownership reduces costly bargaining disputes, as bargainers’ interests are more aligned. We then test the theory with collective bargaining data, where employee stock ownership plans (ESOPs) are the source of joint ownership. The theory predicts that ESOPs will lead to a reduction in strike incidence and the fraction of labor disputes that involve a strike. We examine these predictions using U.S. bargaining data from 1970-1995. The data suggest that ESOPs do increase the efficiency of labor negotiations by shifting the composition of disputes away from costly strikes. Consistent with improved bargaining efficiency, we find that the announcement of a union ESOP leads to a 50% larger stock market reaction as compared to the announcement of a nonunion ESOP.
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Bibliographic InfoPaper provided by University of Maryland, Department of Economics - Peter Cramton in its series Papers of Peter Cramton with number 98wpesop.
Length: 21 pages
Date of creation: Jun 2010
Date of revision: Jun 2010
Note: Working Paper
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Bargaining; collective bargaining; ESOP; cross ownership; joint venture; strikes; dispute resolution; dispute costs;
Find related papers by JEL classification:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
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