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Union Wage Policy: The Importance of Labour Mobility and the Degree of Centralization

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  • Hoel, Michael

Abstract

With endogenous product prices, nationwide wage-setting gives lower unemployment than decentralized wage-setting. However, intermediate-level wage-setting may give more unemployment than both completely decentralized and completely centralized wage-setting. The main part of the paper considers a dynamic model, which includes flows of workers between firms and in and out of unemployment. With less than full centralization, the wages chosen by unions are lower the higher is the degree of labor mobility. Wages are also lower the higher is the degree of centralization, unless labor mobility is very high. Copyright 1991 by The London School of Economics and Political Science.

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  • Hoel, Michael, 1991. "Union Wage Policy: The Importance of Labour Mobility and the Degree of Centralization," Economica, London School of Economics and Political Science, vol. 58(230), pages 139-153, May.
  • Handle: RePEc:bla:econom:v:58:y:1991:i:230:p:139-53
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    Cited by:

    1. Marcus Dittrich, 2010. "Welfare Effects of Local versus Central Wage Bargaining," LABOUR, CEIS, vol. 24(1), pages 26-34, March.
    2. Brunello, Giorgio, 1998. "Does centralised bargaining reduce individual effort?," European Journal of Political Economy, Elsevier, vol. 14(2), pages 381-406, May.
    3. Erling Steigum Jr., "undated". "Fiscal Deficits, Asset Prices and Intergenerational Distribution in an Open Unionized Economy," EPRU Working Paper Series 97-19, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    4. repec:clr:wugarc:y:1993:v:19i:4p:423 is not listed on IDEAS
    5. Thomas Beissinger & Hartmut Egger, 2004. "Dynamic wage bargaining if benefits are tied to individual wages," Oxford Economic Papers, Oxford University Press, vol. 56(3), pages 437-460, July.
    6. Sijbren Cnossen, 2002. "Tax Policy in the European Union: A Review of Issues and Options," CESifo Working Paper Series 758, CESifo Group Munich.
    7. Cnossen,Sijbren, 2002. "Tax policy in the european union, A review of issues and options," Research Memorandum 023, Maastricht University, Maastricht Research School of Economics of Technology and Organization (METEOR).
    8. Wehke, Sven, 2009. "Union wages, hours of work and the effectiveness of partial coordination agreements," Labour Economics, Elsevier, vol. 16(1), pages 89-96, January.
    9. Bill Yang, 1995. "Unionized oligopoly, labor-management cooperation, and international competitiveness," Journal of Economics, Springer, vol. 62(1), pages 33-53, February.
    10. repec:clr:wugarc:y:1993:v:19i:4p:451 is not listed on IDEAS
    11. Corneo, Giacomo, 1995. "National wage bargaining in an internationally integrated product market," European Journal of Political Economy, Elsevier, vol. 11(3), pages 503-520, September.
    12. Lorenzo Forni, 2004. "Centralization of wage bargaining and the unemployment rate: revisiting the hump-shape hypothesis," Temi di discussione (Economic working papers) 492, Bank of Italy, Economic Research and International Relations Area.
    13. Guertzgen Nicole, 2009. "Firm Heterogeneity and Wages under Different Bargaining Regimes: Does a Centralised Union Care for Low-Productivity Firms?," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 239-253, April.
    14. Erling Steigum, 2001. "Trade Unions and the Burden of the Public Debt," CESifo Working Paper Series 587, CESifo Group Munich.
    15. Blomgren-Hansen, Niels, 2012. "Optimum organization of the labor market in a small open economy," Labour Economics, Elsevier, vol. 19(2), pages 222-231.
    16. Dittrich, Marcus, 2006. "Welfare Effects of Union Bargaining Centralisation in a Two-Sector Economy," MPRA Paper 11, University Library of Munich, Germany, revised Sep 2006.
    17. Karl Ove Moene & Michael Wallerstein, 1993. "The Economic Performance of Different Bargaining Institutions," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 19(4), pages 423-450.
    18. Michael Mesch, 1993. "Zentralisierung der Lohnsetzung, Reallöhne und Beschäftigung," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 19(4), pages 451-459.

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