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Trade unions, efficiency wages and employment

Author

Listed:
  • Nicolas Sanz

    () (ECONOMIX, Université Paris X-Nanterre)

  • Jean-Christophe Pereau

    () (O.E.P., Université de Marne-la-Vallée)

Abstract

This short paper combines three of the main theories of the labour market (the shirking, turnover cost and union-firm bargaining models) in an integrated framework to highlight the consequences of their interactions for the determination of the wage and the firm's labour demand. We show that bargaining and both efficiency wage theories are mutually reinforcing, leading to higher wages. Like Weiss (1990), Fehr (1991) and Garino and Martin (2000), we find a "backward bending" labour demand curve along which the employment level increases with the wage for some range. However, the aim of this note is to show that the negotiated wage is always located on the downward sloping portion of the labour demand curve, whatever the source of the efficiency wage effects involved.

Suggested Citation

  • Nicolas Sanz & Jean-Christophe Pereau, 2006. "Trade unions, efficiency wages and employment," Economics Bulletin, AccessEcon, vol. 10(4), pages 1-8.
  • Handle: RePEc:ebl:ecbull:eb-06j20002
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    File URL: http://www.accessecon.com/pubs/EB/2006/Volume10/EB-06J20002A.pdf
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    References listed on IDEAS

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    1. Chatterjee, Satyajit & Cooper, Russell, 1989. "Multiplicity of Equilibria and Fluctuations in Dynamic Imperfectly Competitive Economies," American Economic Review, American Economic Association, vol. 79(2), pages 353-357, May.
    2. Garino, Gaia & Martin, Christopher, 2000. "Efficiency wages and union-firm bargaining," Economics Letters, Elsevier, vol. 69(2), pages 181-185, November.
    3. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-388, May.
    4. Marti, Christopher, 1997. "Efficiency wages: combining the shirking and turnover cost models," Economics Letters, Elsevier, vol. 57(3), pages 327-330, December.
    5. Manning, Alan, 1990. "Imperfect Competition, Multiple Equilibria and Unemployment Policy," Economic Journal, Royal Economic Society, vol. 100(400), pages 151-162, Supplemen.
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    Citations

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    Cited by:

    1. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2015. "Union, efficiency of labour and endogenous growth," MPRA Paper 64911, University Library of Munich, Germany.
    2. Fernando Zanella, 2008. "Different times, different commitments, but the same old practices: failure of the efficiency wage model for socially devoted firms," Economics Bulletin, AccessEcon, vol. 10(9), pages 1-6.
    3. Nicolas Piluso & Gabriel Colletis, 2012. "Shareholder value and equilibrium rate of unemployment," Economics Bulletin, AccessEcon, vol. 32(4), pages 3233-3242.
    4. Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2014. "Unionised labour market, efficiency wage and endogenous growth," MPRA Paper 58332, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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