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Trade Union Priorities and Wage Rigidity

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  • Drakopoulos, Stavros A.

Abstract

The starting point of the paper is that trade unions engage in substitution once certain targets have been met. This implies that a priority-based or hierarchical model might be a better approximation to union behaviour. This model requires a two-part union utility function which changes when a satisfactory (or target) level of the priority variable (e.g. the wage rate) is met. After demonstrating the workings of such a model in a monopoly union framework, it is shown that when the wage is below the target level, there is real wage rigidity. Employment increases only when the target wage has been achieved

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35791.

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Date of creation: May 1994
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Publication status: Published in Labour 3.8(1994): pp. 567-580
Handle: RePEc:pra:mprapa:35791

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Keywords: Trade Unions; Wages;

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  1. Arthur M. Ross & Kirk R. Petshek, 1950. "The tie between wages and employment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 4(1), pages 94-101, October.
  2. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  3. Johnson, George E, 1985. " The Economic Theory of Trade Unions-An Introductory Survey: Comment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 194-96.
  4. Drakopoulos, S A, 1992. "Psychological Thresholds, Demand and Price Rigidity," The Manchester School of Economic & Social Studies, University of Manchester, University of Manchester, vol. 60(2), pages 152-68, June.
  5. Lawrence H. Summers, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," NBER Working Papers 2590, National Bureau of Economic Research, Inc.
  6. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 92(367), pages 576-95, September.
  7. Akerlof, George A, 1969. "Relative Wages and the Rate of Inflation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 83(3), pages 353-74, August.
  8. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  9. Melvin W. Reder, 1960. "Job scarcity and the nature of union power," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 13(3), pages 349-362, April.
  10. Corden, W M, 1981. "Taxation, Real Wage Rigidity and Employment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 91(362), pages 309-30, June.
  11. Carruth, Alan A & Oswald, Andrew J, 1987. "On Union Preferences and Labour Market Models: Insiders and Outsi ders," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(386), pages 431-45, June.
  12. Jones, Stephen R. G. & McKenna, C. J., 1989. "The effect of outsiders on union contracts," European Economic Review, Elsevier, vol. 33(8), pages 1567-1573, October.
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