IDEAS home Printed from https://ideas.repec.org/a/bla/labour/v24y2010i1p26-34.html
   My bibliography  Save this article

Welfare Effects of Local versus Central Wage Bargaining

Author

Listed:
  • Marcus Dittrich

Abstract

The paper analyses the welfare effects of union bargaining (de)centralization in a dual labour market with a unionized and a competitive sector. We show that social welfare depends on both the structure of the union's objective function and the elasticities of labour demand in both sectors. The welfare‐maximizing employment allocation can be obtained under a high degree of centralization if the union maximizes the total wage‐bill. Otherwise, if the union is rent maximizing, welfare is higher under local bargaining. However, in that case neither central nor local wage setting yields the social optimum.

Suggested Citation

  • Marcus Dittrich, 2010. "Welfare Effects of Local versus Central Wage Bargaining," LABOUR, CEIS, vol. 24(1), pages 26-34, March.
    • Handle: RePEc:bla:labour:v:24:y:2010:i:1:p:26-34
    DOI: 10.1111/j.1467-9914.2010.00469.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1467-9914.2010.00469.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1467-9914.2010.00469.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. Kiander, Jaakko, 1993. "Endogenous unemployment insurance in a monopoly union model when job search matters," Journal of Public Economics, Elsevier, vol. 52(1), pages 101-115, August.
    2. Rodseth, Asbjorn, 1993. "Efficiency Wages and Local versus Central Bargaining," Oxford Economic Papers, Oxford University Press, vol. 45(3), pages 470-481, July.
    3. Hieser, R O, 1970. "Wage Determination with Bilateral Monopoly in the Labour Market: A Theoretical Treatment," The Economic Record, The Economic Society of Australia, vol. 46(113), pages 55-72, March.
    4. Pekka Sinko, 2004. "Subsidizing versus Experience Rating of Unemployment Insurance in Unionized Labor Markets," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(2), pages 186-204, August.
    5. Lawrence Summers & Jonathan Gruber & Rodrigo Vergara, 1993. "Taxation and the Structure of Labor Markets: The Case of Corporatism," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 108(2), pages 385-411.
    6. Juha Kilponen & Pekka Sinko, 2005. "Taxation And Centralised Wage Setting: The Case Of Endogenous Labour Supply," Scottish Journal of Political Economy, Scottish Economic Society, vol. 52(4), pages 587-606, September.
    7. Holmlund, Bertil & Lundborg, Per, 1999. "Wage bargaining, union membership, and the organization of unemployment insurance," Labour Economics, Elsevier, vol. 6(3), pages 397-415, September.
    8. Rowthorn, R E, 1992. "Centralisation, Employment and Wage Dispersion," Economic Journal, Royal Economic Society, vol. 102(412), pages 506-523, May.
    9. R. O. Hieser, 1970. "Wage Determination with Bilateral Monopoly in the Labour Market: A Theoretical Treatment," The Economic Record, The Economic Society of Australia, vol. 46(1), pages 55-72, March.
    10. 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.
    11. Rosen, Sherwin, 1970. "Unionism and the Occupational Wage Structure in the United States," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 11(2), pages 269-286, June.
    12. Marianthi Leontaridi, 1998. "Segmented Labour Markets: Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 12(1), pages 103-109, February.
    13. Oswald, Andrew J, 1979. "Wage Determination in an Economy with Many Trade Unions," Oxford Economic Papers, Oxford University Press, vol. 31(3), pages 369-385, November.
    14. Rasmussen, Bo Sandemann, 1992. " Union Cooperation and Nontraded Goods in General Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 94(4), pages 561-579.
    15. Barth, Erling & Zweimuller, Josef, 1995. " Relative Wages under Decentralized and Corporatist Bargaining Systems," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(3), pages 369-384, September.
    16. Holmlund, Bertil & Lundborg, Per, 1988. " Unemployment Insurance and Union Wage Setting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 90(2), pages 161-172.
    17. Leontaridi, Marianthi Rannia, 1998. "Segmented Labour Markets: Theory and Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 12(1), pages 63-101, February.
    18. Hoel, Michael, 1990. " Local versus Central Wage Bargaining with Endogenous Investments," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(3), pages 453-469.
    19. Hoel, Michael, 1989. "Efficiency wages and local versus central wage bargaining," Economics Letters, Elsevier, vol. 30(2), pages 175-179, August.
    20. Johnston, J, 1972. "A Model of Wage Determination under Bilateral Monopoly," Economic Journal, Royal Economic Society, vol. 82(327), pages 837-852, September.
    Full references (including those not matched with items on IDEAS)

    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. 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.
    2. 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.
    3. repec:clr:wugarc:y:1993:v:19i:4p:423 is not listed on IDEAS
    4. Sinko, Pekka, 2003. "Subsidizing vs. Experience Rating of Unemployment Insurance in Unionized Labor Markets," Discussion Papers 319, VATT Institute for Economic Research.
    5. Frank Scharr, 2005. "Tarifbindung, Rententeilung und Konzessionsverträge als Einflussgrößen der Lohnhöhe in Unternehmen : eine Untersuchung mit Mikrodaten für thüringische Firmen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 39, July.
    6. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-related unemployment benefits and unemployment," Economic Systems, Elsevier, vol. 27(1), pages 41-62, March.
    7. Stavros Drakopoulos & Ioannis Katselidis, 2014. "The Development of Trade Union Theory and Mainstream Economic Methodology," Journal of Economic Issues, Taylor & Francis Journals, vol. 48(4), pages 1133-1149, December.
    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. Habib Ahmed & Stephen M. Miller, 1999. "A Model of Endogenous Union Density and Membership," Working papers 1999-01, University of Connecticut, Department of Economics.
    10. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-Related Unemployment Benefits in a Unionised Economy," IZA Discussion Papers 701, Institute of Labor Economics (IZA).
    11. P. K. Trivedi & J. Rayner, 1978. "Wage Inertia and Comparison Effects in Australian Award Wage Determination, 1964‐74," The Economic Record, The Economic Society of Australia, vol. 54(2), pages 195-218, August.
    12. Pierre‐Richard Agénor, 2004. "Macroeconomic Adjustment and the Poor: Analytical Issues and Cross‐Country Evidence," Journal of Economic Surveys, Wiley Blackwell, vol. 18(3), pages 351-408, July.
    13. repec:eee:labchp:v:2:y:1986:i:c:p:1039-1089 is not listed on IDEAS
    14. Fernando Botelho & Vladimir Ponczek, 2011. "Segmentation in the Brazilian Labor Market," Economic Development and Cultural Change, University of Chicago Press, vol. 59(2), pages 437-463.
    15. Lindbeck, A & Snower, D-J, 1996. "Centralized Bargaining, Multi-Tasking, and Work Incentives," Papers 620, Stockholm - International Economic Studies.
    16. Jonathan Pratschke & Enrica Morlicchio, 2012. "Social Polarisation, the Labour Market and Economic Restructuring in Europe: An Urban Perspective," Urban Studies, Urban Studies Journal Limited, vol. 49(9), pages 1891-1907, July.
    17. Christian Pfeifer, 2012. "Fixed-term contracts and wages revisited using linked employer-employee data [Befristete Arbeitsverträge und Entlohnung neu untersucht mit verbundenen Arbeitgeber-Arbeitnehmer-Daten]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 45(2), pages 171-183, July.
    18. D. Boccanfuso & L. Savard, 2012. "A Segmented Labour Supply Model Estimation for the Construction of a CGE Microsimulation Model: An Application to the Philippines," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 6(2), pages 211-234, May.
    19. Francine D. Blau & Lawrence M. Kahn, 2003. "Understanding International Differences in the Gender Pay Gap," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 106-144, January.
    20. Henry S. Farber, 1984. "The Analysis of Union Behavior," NBER Working Papers 1502, National Bureau of Economic Research, Inc.
    21. Janine Leschke & Silvana Weiss, 2020. "With a Little Help from My Friends: Social-Network Job Search and Overqualification among Recent Intra-EU Migrants Moving from East to West," Work, Employment & Society, British Sociological Association, vol. 34(5), pages 769-788, October.
    22. Daniela Peres Cardozo & Marina Silva Cunha, 2019. "Evidence of the Public–Private Wage Gap for Brazil in the Period from 2008 to 2016," The Indian Journal of Labour Economics, Springer;The Indian Society of Labour Economics (ISLE), vol. 62(4), pages 577-594, December.

    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:labour:v:24:y:2010:i:1:p:26-34. See general information about how to correct material in RePEc.

    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/csrotit.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.