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Endogenous wage bargaining institutions in oligopolistic sectors

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  • Emmanuel Petrakis

  • Minas Vlassis

Abstract

This paper explores the endogenous emergence of wage bargaining institutions in a union-oligopoly framework. Technological asymmetries among firms are shown to be the driving force for the emergence of alternative wage bargaining centralization structures that are observable in real life. As wage deals at the sector-level obtain the consensus of all unions and the efficient firms, a regulator has an incentive to authorize those deals by activating/establishing a Minimum Sectoral Wage Institution(MSWI). If productivity differences are high enough, wage setting above the established wage floor may subsequently occur in efficient firms. Otherwise, a completely centralized wage bargaining structure emerges and the sector-level wage deal is simply confirmed as the firms’ wage rate. If, however, productivity asymmetries are rather insignificant, firms and unions have conflicting interests and a completely decentralized wage bargaining regime prevails in equilibrium. Copyright Springer-Verlag Berlin/Heidelberg 2004

Suggested Citation

  • Emmanuel Petrakis & Minas Vlassis, 2004. "Endogenous wage bargaining institutions in oligopolistic sectors," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 55-73, July.
    • Handle: RePEc:spr:joecth:v:24:y:2004:i:1:p:55-73
    DOI: 10.1007/s00199-003-0410-3
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    Keywords

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    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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