IDEAS home Printed from https://ideas.repec.org/a/bla/jecrev/v60y2009i4p435-445.html
   My bibliography  Save this article

Raising Wages To Deter Entry Into Unionized Markets

Author

Listed:
  • SHINGO ISHIGURO
  • LAIXUN ZHAO

Abstract

This paper investigates entry under a unionized oligopoly when entry and wage negotiations are sequential. We find the incumbent has incentives to raise the wage, which strengthens the bargaining position of the union relative to the entrant at subsequent negotiations and thus discourages entry. We show that entry is more likely to be deterred (accommodated) if the union is wage (employment) oriented and that raising unemployment compensation during recession not only reduces the burden of the unemployed but also induces new entry, creating more employment opportunities. However, during a business boom, reducing unemployment compensation is a better policy.

Suggested Citation

  • Shingo Ishiguro & Laixun Zhao, 2009. "Raising Wages To Deter Entry Into Unionized Markets," The Japanese Economic Review, Japanese Economic Association, vol. 60(4), pages 435-445, December.
  • Handle: RePEc:bla:jecrev:v:60:y:2009:i:4:p:435-445
    DOI: 10.1111/j.1468-5876.2008.00464.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1468-5876.2008.00464.x
    Download Restriction: no

    File URL: https://libkey.io/10.1111/j.1468-5876.2008.00464.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September.
    2. Salop, Steven C & Scheffman, David T, 1983. "Raising Rivals' Costs," American Economic Review, American Economic Association, vol. 73(2), pages 267-271, May.
    3. Dewatripont, Mathias, 1987. "Entry deterrence under trade unions," European Economic Review, Elsevier, vol. 31(1-2), pages 149-156.
    4. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-459, March.
    5. Shingo Ishiguro & Laixun Zhao, 2004. "Raising Wages to Deter Entry under Unionization," Discussion Paper Series 155, Research Institute for Economics & Business Administration, Kobe University.
    6. Mezzetti, Claudio & Dinopoulos, Elias, 1991. "Domestic unionization and import competition," Journal of International Economics, Elsevier, vol. 31(1-2), pages 79-100, August.
    7. Pemberton, James, 1988. "A 'Managerial' Model of the Trade Union," Economic Journal, Royal Economic Society, vol. 98(392), pages 755-771, September.
    8. Dertouzos, James N & Pencavel, John H, 1981. "Wage and Employment Determination under Trade Unionism: The International Typographical Union," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1162-1181, December.
    9. Dixit, Avinash, 1980. "The Role of Investment in Entry-Deterrence," Economic Journal, Royal Economic Society, vol. 90(357), pages 95-106, March.
    10. Shingo Ishiguro & Yoshimasa Shirai, 1998. "Entry Deterrence in a Unionized Oligopoly," The Japanese Economic Review, Japanese Economic Association, vol. 49(2), pages 210-221, June.
    11. Mathias Dewatripont, 1988. "The Impact of Trade Unions on Incentives to Deter Entry," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 191-199, Summer.
    12. Gollier, Christian, 1991. "Wage Differentials, the Insider-Outsider Dilemma, and Entry-Deterrence," Oxford Economic Papers, Oxford University Press, vol. 43(3), pages 391-408, July.
    13. Oliver E. Williamson, 1968. "Wage Rates as a Barrier to Entry: The Pennington Case in Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 82(1), pages 85-116.
    14. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-193.
    15. B. Curtis Eaton & Richard G. Lipsey, 1980. "Exit Barriers are Entry Barriers: The Durability of Capital as a Barrier to Entry," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 721-729, Autumn.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Marco de Pinto & Laszlo Goerke, 2020. "Welfare‐enhancing Trade Unions in an Oligopoly with Excessive Entry," Manchester School, University of Manchester, vol. 88(1), pages 60-90, January.
    2. Ronald Bachmann & Thomas K. Bauer & Hanna Kröger, 2012. "Minimum Wages as a Barrier to Entry – Evidence from Germany," Ruhr Economic Papers 0329, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    3. repec:zbw:rwirep:0329 is not listed on IDEAS
    4. Ronald Bachmann & Thomas K. Bauer & Hanna Frings, 2014. "Minimum Wages as a Barrier to Entry: Evidence from Germany," LABOUR, CEIS, vol. 28(3), pages 338-357, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Shingo Ishiguro & Laixun Zhao, 2004. "Raising Wages to Deter Entry under Unionization," Discussion Paper Series 155, Research Institute for Economics & Business Administration, Kobe University.
    2. Rupayan Pal & Bibhas Saha, 2016. "Entry Threats and Inefficiency in ‘Efficient Bargaining’," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 258-277, July.
    3. James A. Brander & Barbara J. Spencer, 1986. "International Oligopoly and Asymmetric Labour Market Institutions," NBER Working Papers 2038, National Bureau of Economic Research, Inc.
    4. Rupayan Pal & Bibhas Saha, 2008. "Union-oligopoly bargaining and entry deterrence: a reassessment of limit pricing," Journal of Economics, Springer, vol. 95(2), pages 121-147, November.
    5. Ronald Bachmann & Thomas K. Bauer & Hanna Frings, 2014. "Minimum Wages as a Barrier to Entry: Evidence from Germany," LABOUR, CEIS, vol. 28(3), pages 338-357, September.
    6. Rupayan Pal & Bibhas Saha, 2010. "Entry Threats, and Inefficiency in ‘Efficient Bargaining’," Labor Economics Working Papers 23020, East Asian Bureau of Economic Research.
    7. Majumdar Sumit K., 2015. "Competitor entry impact on jobs and wages in incumbent firms: retrospective evidence from a natural experiment," Business and Politics, De Gruyter, vol. 17(2), pages 291-326, August.
    8. Rupayan Pal & Bibhas Saha, 2010. "Entry Threats and Inefficiency in ‘Efficient Bargaining’," Working Papers id:2833, eSocialSciences.
    9. Marco de Pinto & Laszlo Goerke, 2020. "Welfare‐enhancing Trade Unions in an Oligopoly with Excessive Entry," Manchester School, University of Manchester, vol. 88(1), pages 60-90, January.
    10. Michael Waldman, 1987. "Underinvestment in Entry Deterrence: When and Why," UCLA Economics Working Papers 456, UCLA Department of Economics.
    11. Rupayan Pal & Vinay Ramani, 2017. "Will a matchmaker invite her potential rival in?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(4), pages 806-819, December.
    12. Majumdar, Sumit K. & Mishra, Birendra & Chang, Hsihui, 2007. "Technology investment strategy in the presence of competitor entry: Broadband deployment in the US telecommunications industry," Technology in Society, Elsevier, vol. 29(4), pages 422-430.
    13. Luciano Fanti & Domenico Buccella, 2016. "Bargaining Agenda and Entry in a Unionised Model with Network Effects," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 2(1), pages 91-121, March.
    14. Sumon Kumar Bhaumik & Shubhashis Gangopadhyay & Shagun Krishnan, 2006. "Reforms, Entry and Productivity: Some Evidence from the Indian Manufacturing Sector," William Davidson Institute Working Papers Series 822, William Davidson Institute at the University of Michigan.
    15. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899.
    16. Kyle Bagwell & Garey Ramey, 1991. "Oligopoly Limit Pricing," RAND Journal of Economics, The RAND Corporation, vol. 22(2), pages 155-172, Summer.
    17. Laixun Zhao, 1996. "The Complementarity Between Endogenous Protection And Direct Foreign Investment," Economics and Politics, Wiley Blackwell, vol. 8(1), pages 61-72, March.
    18. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September.
    19. Michael Waldman, 1983. "Limited Collusion and Entry Deterence," UCLA Economics Working Papers 306, UCLA Department of Economics.
    20. Picard, P. M. & Toulemonde, E., 2003. "Regional asymmetries: economies of agglomeration versus unionized labor markets," Regional Science and Urban Economics, Elsevier, vol. 33(2), pages 223-249, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jecrev:v:60:y:2009:i:4:p:435-445. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/jeaaaea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/jeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.