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Trade Union Objectives and the Cyclical Variability of Wages and Employment

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  • Pehkonen, Jaakko

Abstract

The purpose of this paper is to investigate whether a simple monopoly union model of wage and employment determination is consistent with the cyclical movements of wages and employment observed in the Finnish manufacturing and mining sector. Estimation of the two-equation model implies that considerably less weight is placed on the variability of employment relative to that of wages in the union's objective function. The findings are consistent with the observed cyclical inflexibility of real wages relative to employment. However, because the data fail to accept certain parameter restrictions embodied in the different model specifications, the study raises doubts about the adequacy of the simple monopoly union model to explain the data generation process. Copyright 1990 by The editors of the Scandinavian Journal of Economics.

Suggested Citation

  • Pehkonen, Jaakko, 1990. " Trade Union Objectives and the Cyclical Variability of Wages and Employment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(4), pages 573-586.
  • Handle: RePEc:bla:scandj:v:92:y:1990:i:4:p:573-86
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    Cited by:

    1. Boris Hirsch & Claus Schnabel, 2014. "What can we Learn from Bargaining Models about Union Power? The Decline in Union Power in Germany, 1992–2009," Manchester School, University of Manchester, vol. 82(3), pages 347-362, June.
    2. Matthias Strifler & Thomas Beissinger, 2016. "Fairness Considerations in Labor Union Wage Setting – A Theoretical Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 303-330, July.
    3. Laszlo Goerke, 1998. "Privatization and efficiency wages," Journal of Economics, Springer, vol. 67(3), pages 243-264, October.
    4. Tyrväinen, Timo, 1991. "Unions, wages and employment : evidence from Finland," Research Discussion Papers 16/1991, Bank of Finland.
    5. Carsten Eckel & Hartmut Egger, 2017. "The Dilemma of Labor Unions: Local Objectives vs Global Bargaining," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 534-566, August.
    6. Persyn, Damiaan, 2008. "Trade as a Wage Disciplining Device," IZA Discussion Papers 3786, Institute for the Study of Labor (IZA).
    7. Goerke, Laszlo, 2007. "Unemployment Insurance Savings Accounts and Collective Wage Determination," IZA Discussion Papers 3141, Institute for the Study of Labor (IZA).

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