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Management Union Bargaining Under Minimum Wage Regulation in Less Developed Countries

Author

Listed:
  • Saikat Dutta

    (London Business School)

  • Prabal Roy Chowdhury

    (Jawaharlal Nehru University)

Abstract

We examine the impact of changes in minimum wages regulation on unionized workers. The bargaining process between the management and the union is modeled as an alternating-offers bargaining game over employment and wage. We find that the equilibrium wage is equal to the minimum wages and that an increase in minimum wages decreases the income of the employer, as well as the level of employment and hence of output. Moreover if the marginal product of labour is inelastic, then the income of the union declines as well. Thus our results seriously question the validity of indiscriminate increases in minimum wages.

Suggested Citation

  • Saikat Dutta & Prabal Roy Chowdhury, 1998. "Management Union Bargaining Under Minimum Wage Regulation in Less Developed Countries," Indian Economic Review, Department of Economics, Delhi School of Economics, vol. 33(2), pages 169-184, July.
    • Handle: RePEc:dse:indecr:v:33:y:1998:i:2:p:169-184
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    Cited by:

    1. Nirvikar Singh, 2004. "The Impact of International Labor Standards: A Survey of Economic Theory," International Trade 0412007, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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