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Bargaining with Commitment between Workers and Large Firms

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  • William B. Hawkins

    (University of Rochester)

Abstract

I study bargaining between workers and large firms when commitment to long-term contracts is feasible. The marginal surplus associated with a match is split in a pre-determined ratio, analogously to generalized Nash bargaining. Commitment avoids the over-hiring inefficiency identified by Stole and Zwiebel (1999a,b) and Smith (1999). However, even under the Hosios (1990) condition, the equilibrium is still not constrained efficient since large firms search too intensively relative to small firms. If workers can direct their search to firms by size, or if firms can hire workers instantaneously at constant marginal cost, the equilibrium is constrained efficient if the Hosios condition applies. The pattern of growth rates of firms by size can be used to identify how firms bargain with workers.

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Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 308.

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Date of creation: 2011
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Handle: RePEc:red:sed011:308

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  1. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Munich Reprints in Economics 20471, University of Munich, Department of Economics.
  2. Elhanan Helpman & Oleg Itskhoki, 2010. "Labour Market Rigidities, Trade and Unemployment," Review of Economic Studies, Oxford University Press, vol. 77(3), pages 1100-1137.
  3. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  4. Bertola, Giuseppe & Caballero, Ricardo J, 1994. "Cross-Sectional Efficiency and Labour Hoarding in a Matching Model of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 435-56, July.
  5. Moen, E.R., 1995. "Competitive Search Equilibrium," Memorandum 37/1995, Oslo University, Department of Economics.
  6. Leo Kaas & Philipp Kircher, 2011. "Efficient Firm Dynamics in a Frictional Labor Market," CESifo Working Paper Series 3336, CESifo Group Munich.
  7. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
  8. Shimer, R. & Smith, L., 1997. "Assortative Matching and Search," Working papers 97-2a, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Nicolas Roys, 2010. "Estimating Labor Market Rigidities with Heterogeneous Firms," 2010 Meeting Papers 127, Society for Economic Dynamics.
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  11. Steven J. Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2007. "Volatility and Dispersion in Business Growth Rates: Publicly Traded versus Privately Held Firms," NBER Chapters, in: NBER Macroeconomics Annual 2006, Volume 21, pages 107-180 National Bureau of Economic Research, Inc.
  12. William B. Hawkins, 2011. "Bargaining with Commitment between Workers and Large Firms," 2011 Meeting Papers 308, Society for Economic Dynamics.
  13. Roberto M. Samaniego & Alain Delacroix, 2010. "Joint Determination of Product and Labor Market Policies in a Model of Rent Creation and Division," 2010 Meeting Papers 1105, Society for Economic Dynamics.
  14. Felbermayr, Gabriel & Prat, Julien, 2007. "Product Market Regulation, Firm Selection and Unemployment," IZA Discussion Papers 2754, Institute for the Study of Labor (IZA).
  15. Ebell, Monique & Haefke, Christian, 2006. "Product Market Deregulation and the U.S. Employment Miracle," IZA Discussion Papers 1946, Institute for the Study of Labor (IZA).
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  17. Robert E. Hall & Alan B. Krueger, 2012. "Evidence on the Incidence of Wage Posting, Wage Bargaining, and On-the-Job Search," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(4), pages 56-67, October.
  18. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
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  22. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 375-410, July.
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  25. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Organizational Design and Technology Choice under Intrafirm Bargaining," American Economic Review, American Economic Association, vol. 86(1), pages 195-222, March.
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  28. Hawkins, William B. & Acemoglu, Daron, 0. "Search with multi-worker firms," Theoretical Economics, Econometric Society.
  29. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
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Cited by:
  1. Kaas, Leo & Kircher, Philipp, 2011. "Efficient Firm Dynamics in a Frictional Labor Market," IZA Discussion Papers 5452, Institute for the Study of Labor (IZA).
  2. William Hawkins, 2014. "Online Appendix to "Bargaining with Commitment Between Workers and Large Firms"," Technical Appendices 12-114, Review of Economic Dynamics.
  3. William B. Hawkins, 2011. "Bargaining with Commitment between Workers and Large Firms," 2011 Meeting Papers 308, Society for Economic Dynamics.
  4. Moritz Ritter, 2012. "Inequality and International Trade: The Role of Skill-Biased Technology and Search Frictions," DETU Working Papers 1204, Department of Economics, Temple University.
  5. Hawkins, William B. & Acemoglu, Daron, 0. "Search with multi-worker firms," Theoretical Economics, Econometric Society.

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