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Local versus Central Wage Bargaining with Endogenous Investments

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  • Hoel, Michael

Abstract

Investment behavior may depend on whether wage bargaining takes place centrally or locally (at the firm level). The outcome of the wage bargain will in turn depend on previous investments. Ignoring other differences between the two bargaining regimes, endogenous investments imply that wages are lower and profits higher under local wage bargaining than under central bargaining. This does not necessarily imply that employment is highest under local bargaining, since investments may differ in the two cases. With a Nash bargaining solution, however, reasonable assumptions imply that employment is highest under local wage bargaining. Copyright 1990 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Hoel, Michael, 1990. " Local versus Central Wage Bargaining with Endogenous Investments," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(3), pages 453-469.
  • Handle: RePEc:bla:scandj:v:92:y:1990:i:3:p:453-69
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    References listed on IDEAS

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    1. Kenneth Rogoff, 1985. "The Optimal Degree of Commitment to an Intermediate Monetary Target," The Quarterly Journal of Economics, Oxford University Press, vol. 100(4), pages 1169-1189.
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    6. Barro, Robert J. & Gordon, David B., 1983. "Rules, discretion and reputation in a model of monetary policy," Journal of Monetary Economics, Elsevier, pages 101-121.
    7. Jeffrey A. Frankel and Andrew K. Rose., 1996. "Economic Structure and the Decision to Adopt a Common Currency," Center for International and Development Economics Research (CIDER) Working Papers C96-073, University of California at Berkeley.
    8. Persson, Torsten & Tabellini, Guido, 1995. "Double-edged incentives: Institutions and policy coordination," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 38, pages 1973-2030 Elsevier.
    9. Canzoneri, Matthew B & Gray, Jo Anna, 1985. "Monetary Policy Games and the Consequences of Non-cooperative Behavior," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 26(3), pages 547-564, October.
    10. Matthew B. Canzoneri & Dale W. Henderson, 1991. "Monetary Policy in Interdependent Economies: A Game-Theoretic Approach," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262031787, January.
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    Cited by:

    1. Brunello, Giorgio, 1998. "Does centralised bargaining reduce individual effort?," European Journal of Political Economy, Elsevier, vol. 14(2), pages 381-406, May.
    2. Pohl, Hartmut, 1998. "Die Rolle von Arbeitsmärkten bei der Qualitätsauswahl in vertikal differenzierten Märkten," Discussion Papers, Series I 292, University of Konstanz, Department of Economics.
    3. Claus Hansen, 1999. "Long-run impact of increased wage pressure," Journal of Economics, Springer, pages 141-157.
    4. Sjögren, Tomas, 2017. "Can a Marginally Distorted Labor Market Improve Capital Accumulation, Output and Welfare?," Umeå Economic Studies 946, Umeå University, Department of Economics.
    5. John Duffy & Paul D. McNelis, "undated". "Approximating and Simulating the Real Business Cycle: Linear Quadratic Methods, Parameterized Expectations and Genetic Algorithms," Computing in Economics and Finance 1997 63, Society for Computational Economics.
    6. Schimmelpfennig, Axel, 1999. "Whodunnit? Changes in the relative demand for unskilled and skilled labor," Kiel Working Papers 914, Kiel Institute for the World Economy (IfW).
    7. Jean-François Fagnart & Marc Germain, 1997. "Investment and technological choice in a right-to-manage model," Journal of Economics, Springer, pages 223-247.
    8. 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, pages 423-450.
    9. Hoel, Michael, 1997. "Coordination of environmental policy for transboundary environmental problems?," Journal of Public Economics, Elsevier, pages 199-224.
    10. Kornelius Kraft, 2006. "Wage versus efficient bargaining in oligopoly," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(7), pages 595-604.
    11. 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, October.
    12. Hoel, M., 1996. "Coordination of Environmental Policy for Transboundary Environmental Problems," Memorandum 03/1996, Oslo University, Department of Economics.
    13. Julia Müller & Thorsten Upmann, 2013. "Centralised Labour Market Negotiations," CESifo Working Paper Series 4470, CESifo Group Munich.
    14. 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.
    15. repec:clr:wugarc:y:1993:v:19i:4p:423 is not listed on IDEAS

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