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Union Power, Replacement and Labour Market Dynamics

  • Kai-Uwe Kuuhn

    (University of Michigan and CEPR NERA, CEMFI and CEPR)

  • A. Jorge Padilla

    (University of Michigan and CEPR NERA, CEMFI and CEPR)

Registered author(s):

    In this paper, we construct a new basis for insider--outsider theory that acknowledges that insiders are typically easier to organise, so that they can delegate their bargaining decisions to a representative if they want to. We show that harassment or discrimination of new workers by the insider work force is neither individually rational nor needed to explain union formation or inefficient hiring decisions. However, we show that there is a strong tendency for overemployment. Unions tend to increase the efficiency of hiring decisions although union contracts will look like inducing underemployment. Copyright 2002 Royal Economic Society

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    Article provided by Royal Economic Society in its journal The Economic Journal.

    Volume (Year): 112 (2002)
    Issue (Month): 479 (April)
    Pages: 317-343

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    Handle: RePEc:ecj:econjl:v:112:y:2002:i:479:p:317-343
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    1. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
    2. Peter Cramton & Morley Gunderson & Joseph Tracy, 1999. "The Effect Of Collective Bargaining Legislation On Strikes And Wages," The Review of Economics and Statistics, MIT Press, vol. 81(3), pages 475-487, August.
    3. Begg, David K H, 1988. "Hysteresis, Market Forces, and the Role of Policy in a Dynamic Game with Insiders and Outsiders," Oxford Economic Papers, Oxford University Press, vol. 40(4), pages 587-609, December.
    4. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," Working papers 427, Massachusetts Institute of Technology (MIT), Department of Economics.
    5. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    6. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-97, June.
    7. Fehr, Ernst, 1990. "Cooperation, Harassment, and Involuntary Unemployment: Comment," American Economic Review, American Economic Association, vol. 80(3), pages 624-30, June.
    8. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
    9. Lindbeck, Assar & Snower, Dennis J, 1988. "Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach," American Economic Review, American Economic Association, vol. 78(1), pages 167-88, March.
    10. Lindbeck, Assar & Snower, Dennis J., 1987. "Union activity, unemployment persistence and wage-employment ratchets," European Economic Review, Elsevier, vol. 31(1-2), pages 157-167.
    11. Osborne, Martin J, 1984. "Capitalist-Worker Conflict and Involuntary Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 111-27, January.
    12. Vetter, Henrik & Andersen, Torben M, 1994. "Do Turnover Costs Protect Insiders?," Economic Journal, Royal Economic Society, vol. 104(422), pages 124-30, January.
    13. Naylor, Robin & Raaum, Oddbjorn, 1993. "The Open Shop Union, Wages, and Management Opposition," Oxford Economic Papers, Oxford University Press, vol. 45(4), pages 589-604, October.
    14. Stole, Lars A & Zwiebel, Jeffrey, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Wiley Blackwell, vol. 63(3), pages 375-410, July.
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