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Labour union, entry and consumer welfare

Author

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  • Mukherjee, Arijit
  • Wang, Leonard F.S.

Abstract

It is usually believed that the presence of a labour union makes firms as well as consumers worse off by increasing wages compared to the situation with no labour union. We show that the presence of a labour union may increase the incentive for entry and may also make consumers better off compared to the situation with no labour union if the labour productivity of the entrant is sufficiently higher to that of the incumbent.

Suggested Citation

  • Mukherjee, Arijit & Wang, Leonard F.S., 2013. "Labour union, entry and consumer welfare," Economics Letters, Elsevier, vol. 120(3), pages 603-605.
  • Handle: RePEc:eee:ecolet:v:120:y:2013:i:3:p:603-605
    DOI: 10.1016/j.econlet.2013.06.032
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    References listed on IDEAS

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    1. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September.
    2. Justus Haucap & Christian Wey, 2004. "Unionisation structures and innovation incentives," Economic Journal, Royal Economic Society, vol. 114(494), pages 149-165, March.
    3. A. Mukherjee & U. Broll & S. Mukherjee, 2008. "Unionized labor market and licensing by a monopolist," Journal of Economics, Springer, vol. 93(1), pages 59-79, February.
    4. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    5. Justus Haucap & Christian Wey & Uwe Pauly, 1999. "The Incentives of Employers’ Associations to Raise Rivals’ Costs in the Presence of Collective Bargaining," CIG Working Papers FS IV 99-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    6. Nickell, S J & Andrews, M, 1983. "Unions, Real Wages and Employment in Britain 1951-79," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 183-206, Supplemen.
    7. Naylor, Robin A., 2002. "Industry profits and competition under bilateral oligopoly," Economics Letters, Elsevier, vol. 77(2), pages 169-175, October.
    8. Naylor, Robin, 2002. "The Effects Of Entry In Bilateral Oligopoly," The Warwick Economics Research Paper Series (TWERPS) 638, University of Warwick, Department of Economics.
    9. Arijit Mukherjee, 2008. "Unionised Labour Market and Strategic Production Decision of a Multinational," Economic Journal, Royal Economic Society, vol. 118(532), pages 1621-1639, October.
    10. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
    11. Naylor, Robin A., 2002. "The effects of entry in bilateral oligopoly," Economic Research Papers 269412, University of Warwick - Department of Economics.
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    Citations

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    Cited by:

    1. Jouida, Sameh & Hellara, Slaheddine, 2018. "Diversification and target leverage of financial institutions," Journal of Multinational Financial Management, Elsevier, vol. 46(C), pages 11-35.
    2. Shohei Yoshida, 2018. "Bargaining power and firm profits in asymmetric duopoly: an inverted-U relationship," Journal of Economics, Springer, vol. 124(2), pages 139-158, June.
    3. Cao, Jiyun & Mukherjee, Arijit, 2018. "Foreign direct investment, unionised labour markets and welfare," International Review of Economics & Finance, Elsevier, vol. 58(C), pages 330-339.
    4. Jiyun Cao & Arijit Mukherjee, 2014. "Market Power of the Input Supplier, Technology Transfer and Consumer Welfare," CESifo Working Paper Series 5093, CESifo.
    5. Neto, António & Furukawa, Yuichi & Ribeiro, Ana Paula, 2017. "Can Trade Unions Increase Social Welfare? An R&D Model with Cash-in-Advance Constraints," MPRA Paper 77312, University Library of Munich, Germany.
    6. Jiyun Cao & Arijit Mukherjee, 2017. "Market Power of the Input Supplier, Technology Transfer and Consumer Welfare," Manchester School, University of Manchester, vol. 85(4), pages 430-449, July.
    7. Jiyun Cao & Arijit Mukherjee & Uday Bhanu Sinha, 2020. "The implications of labour unions in the presence of a merger," Manchester School, University of Manchester, vol. 88(4), pages 575-583, July.
    8. Wang, Leonard F.S. & Zeng, Chenhang & Zhang, Qidi, 2019. "Indirect taxation and consumer welfare in an asymmetric Stackelberg oligopoly," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    9. Domenico Buccella, 2016. "Profit sharing as entry deterrence mechanism," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 15(1), pages 17-31, April.
    10. Luciano Fanti & Domenico Buccella, 2016. "Bargaining Agenda and Entry in a Unionised Model with Network Effects," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 2(1), pages 91-121, March.

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    More about this item

    Keywords

    Entry; Labour union; Consumer surplus;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General

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