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Habit formation and trade unions

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  • Laszlo Goerke
  • Sven A Hartmann

Abstract

We analyse how habit formation affects collective bargaining outcomes if a firm-specific trade union determines wages. For a wide variety of alternative analytical settings, such internal reference points induce the union to increase wages over time. A numerical example suggests that the resulting decline in employment can be substantial. Furthermore, policy changes in one period, which are either reversed in the next or anticipated in previous periods, have effects on wage outcomes for multiple periods because they affect the habit stock at times at which they are not yet or no longer in operation.

Suggested Citation

  • Laszlo Goerke & Sven A Hartmann, 2023. "Habit formation and trade unions," Oxford Economic Papers, Oxford University Press, vol. 75(3), pages 681-703.
    • Handle: RePEc:oup:oxecpp:v:75:y:2023:i:3:p:681-703.
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    More about this item

    JEL classification:

    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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