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Unionized Labor Market and Regulation of Monopoly

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  • Jellal, Mohamed

Abstract

In developing countries, empirical evidence suggests that labor unions entail a positive wage gap for unionized workers, in particular in monopolistic and publicly controlled firms. In this paper, we analyze how the presence of a labor union affects the regulation of a monopoly under asymmetric information. Since part of the informational rent left to the monopolistic firm benefits to the syndicate, we prove that the regulator is induced to lower the rent when the union has a large bargaining power. The net consumers' surplus can either increase or decrease with the firm's bargaining power depending on the firm's efficiency type. JEL

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 17279.

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Date of creation: 12 Sep 2009
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Handle: RePEc:pra:mprapa:17279

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Keywords: asymmetric Information ; Labor Union ; Monopolistic Firms ; Regulation Incentives;

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  1. Guesnerie, Roger & Laffont, Jean-Jacques, 1984. "A complete solution to a class of principal-agent problems with an application to the control of a self-managed firm," Journal of Public Economics, Elsevier, vol. 25(3), pages 329-369, December.
  2. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. John Pencavel, 1996. "The Legal Framework for Collective Bargaining in Developing Economies," Working Papers 97008, Stanford University, Department of Economics.
  4. T. Paul Schultz & Germano Mwabu, 1998. "Labor unions and the distribution of wages and employment in South Africa," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 51(4), pages 680-703, July.
  5. Rosen, Sherwin, 1970. "Unionism and the Occupational Wage Structure in the United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(2), pages 269-86, June.
  6. Francis Teal, 1995. "The size and sources of economic rents in a developing country manufacturing labour market," CSAE Working Paper Series 1995-06, Centre for the Study of African Economies, University of Oxford.
  7. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
  8. Owoye, Oluwole, 1994. "Wage Determination and Strike Activity in Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 3(3), pages 447-80, December.
  9. MacIsaac, Donna & Rama, Martin, 1997. "Determinants of Hourly Earnings in Ecuador: The Role of Labor Market Regulations," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S136-65, July.
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