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Wages, Fringe Benefits and Efficiency in Union-Firm Bargaining

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  • Elie Appelbaum

    ()
    (York University, Canada)

Abstract

This paper provides an efficient union-firm bargaining solution within the right to manage framework, by separating efficiency and distribution considerations through bargaining over wage and fringe benefits. We show that without insurance considerations, efficiency is achieved by equating the wage and workers’ opportunity cost and providing the union with a surplus share in accordance with its bargaining power. We also show that with insurance considerations, the optimal contract, again, equates the wage and workers’ opportunity cost, but it also provides full insurance. There is empirical evidence that fringe benefits are, indeed, common and play an important role in union contracts.

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File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/2008/labour-bar.pdf
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Bibliographic Info

Paper provided by York University, Department of Economics in its series Working Papers with number 2008_04.

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Length: 15 pages
Date of creation: Feb 2008
Date of revision:
Handle: RePEc:yca:wpaper:2008_04

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Related research

Keywords: Price Union Contracts; Efficient Bargaining; Right to Manage;

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References

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  1. Bughin, Jacques, 1996. "Trade Unions and Firms' Product Market Power," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 289-307, September.
  2. Andrew Oswald, 1984. "Efficient Contracts are on the Labour Demand Curve: Theory and Facts," Working Papers 555, Princeton University, Department of Economics, Industrial Relations Section..
  3. Booth, Alison L, 1995. "Layoffs with Payoffs: A Bargaining Model of Union Wage and Severance Pay Determination," Economica, London School of Economics and Political Science, vol. 62(248), pages 551-64, November.
  4. Nickell, Stephen & Wadhwani, Sushil, 1991. "Employment Determination in British Industry: Investigations Using Micro-data," Review of Economic Studies, Wiley Blackwell, vol. 58(5), pages 955-69, October.
  5. Besancenot, Damien & Vranceanu, Radu, 1999. "A trade union model with endogenous militancy: interpreting the French case," Labour Economics, Elsevier, vol. 6(3), pages 355-373, September.
  6. Bean, Charles R, 1984. "Optimal Wage Bargains," Economica, London School of Economics and Political Science, vol. 51(202), pages 141-49, May.
  7. 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, vol. 94(3), pages S3-S39, June.
  8. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
  9. Oswald, Andrew J & Turnbull, Peter J, 1985. "Pay and Employment Determination in Britain: What Are Labour," Oxford Review of Economic Policy, Oxford University Press, vol. 1(2), pages 80-97, Summer.
  10. Simon P. Anderson & Michael Devereux, 1989. "Profit-Sharing and Optimal Labour Contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 425-33, May.
  11. Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-45, November.
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Cited by:
  1. Elie Appelbaum, 2009. "Alternating Offers Union-Firm Bargaining: Order of Play and Efficiency," Working Papers 2009_02, York University, Department of Economics.

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