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Bargaining with Commitment Between Workers and Large Firms

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  • William Hawkins

    (Yeshiva University)

Abstract

study the efficiency of search equilibrium under decreasing returns to labor in production. Firms can sign long-term contracts with their workers which give them incentives to maximize the joint surplus associated with their relationship. When the firm hires a new worker, the terms of the contract are determined by bargaining over the marginal surplus. Long-term contracts solve the over-hiring problem identified by previous authors. However, the equilibrium is still not constrained efficient because large, low productivity firms search too intensively relative to small, high productivity firms. This potentially provides a novel justification for subsidizing vacancy creation by young, small firms. (Copyright: Elsevier)

Suggested Citation

  • William Hawkins, 2015. "Bargaining with Commitment Between Workers and Large Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 350-364, April.
    • Handle: RePEc:red:issued:12-114
    DOI: 10.1016/j.red.2014.06.003
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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Adrien Bilal & Niklas Engbom & Simon Mongey & Giovanni L. Violante, 2022. "Firm and Worker Dynamics in a Frictional Labor Market," Econometrica, Econometric Society, vol. 90(4), pages 1425-1462, July.
    2. Bjoern Bruegemann, 2023. "Invariance of Unemployment and Vacancy Dynamics with Respect to Diminishing Returns to Labor at the Firm Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 915-942, December.
    3. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    4. Dossche, Maarten & Lewis, Vivien & Poilly, Céline, 2019. "Employment, hours and the welfare effects of intra-firm bargaining," Journal of Monetary Economics, Elsevier, vol. 104(C), pages 67-84.
    5. William Hawkins, 2015. "Bargaining with Commitment Between Workers and Large Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 350-364, April.
    6. Jäger, Simon & Heining, Jörg, 2019. "How Substitutable Are Workers? Evidence from Worker Deaths," MPRA Paper 109757, University Library of Munich, Germany, revised 01 Jan 2019.
    7. Ritter, Moritz, 2017. "Inequality And International Trade: The Role Of Skill-Biased Technology And Search Frictions," Macroeconomic Dynamics, Cambridge University Press, vol. 21(3), pages 624-643, April.
    8. Sofia Bauducco & Alexandre Janiak, 2015. "The Impact of the Minimum Wage on Capital Accumulation and Employment in a Large-Firm Framework," Working Papers Central Bank of Chile 755, Central Bank of Chile.
    9. , & , B., 2014. "Search with multi-worker firms," Theoretical Economics, Econometric Society, vol. 9(3), September.
    10. Ija Trapeznikova, 2017. "Employment Adjustment And Labor Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58, pages 889-922, August.
    11. Bauducco, Sofía & Janiak, Alexandre, 2018. "The macroeconomic consequences of raising the minimum wage: Capital accumulation, employment and the wage distribution," European Economic Review, Elsevier, vol. 101(C), pages 57-76.
    12. Zhu, Weichao & Wang, Lu & Lang, Youze, 2022. "The costs and benefits of tournament in a frictional labor market," Economic Modelling, Elsevier, vol. 113(C).
    13. Kim, Jiwoon, 2021. "Wage negotiations in multi-worker firms and stochastic bargaining powers of existing workers," Journal of Economic Dynamics and Control, Elsevier, vol. 123(C).
    14. Lang, Youze & Zhu, Weichao, 2020. "Holdup and wage dispersion," Economic Modelling, Elsevier, vol. 90(C), pages 135-142.
    15. Ija Trapeznikova, 2017. "Employment Adjustment And Labor Utilization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(3), pages 889-922, August.
    16. Sedláček, Petr, 2020. "Lost generations of firms and aggregate labor market dynamics," Journal of Monetary Economics, Elsevier, vol. 111(C), pages 16-31.
    17. William Hawkins, 2015. "Bargaining with Commitment Between Workers and Large Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 350-364, April.

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    More about this item

    Keywords

    Bargaining; Random search; Multi-worker firms; Efficiency;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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