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The effects of union wage-settings on firms' production factor decisions

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Listed:
  • Almas Heshmati
  • Ilham Haouas

Abstract

This study is concerned with the development of a theoretical model of the interaction between firms and trade union in determining wages and employment. In a two-step process the union and firm determine wages and capital stock, conditional on which the firm decides on production factors of employment, working hours and capital operating time. This paper suggests the use of a panel data approach applied to manufacturing data. A dynamic model is specified in which the optimal levels of the variables of interest and the speed of their adjustments are modelled in terms of observable policy variables.

Suggested Citation

  • Almas Heshmati & Ilham Haouas, 2004. "The effects of union wage-settings on firms' production factor decisions," Applied Economics Letters, Taylor & Francis Journals, vol. 11(7), pages 415-420.
    • Handle: RePEc:taf:apeclt:v:11:y:2004:i:7:p:415-420
    DOI: 10.1080/1350485042000207207
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    1. Subal Kumbhakar & Almas Heshmati & Lennart Hjalmarsson, 2002. "How Fast Do Banks Adjust? A Dynamic Model of Labor-Use with an Application to Swedish Banks," Journal of Productivity Analysis, Springer, vol. 18(1), pages 79-102, July.
    2. Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-545, November.
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    5. Dertouzos, James N & Pencavel, John H, 1981. "Wage and Employment Determination under Trade Unionism: The International Typographical Union," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1162-1181, December.
    6. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 3-39, June.
    7. Calmfors, Lars, 1982. " Employment Policies, Wage Formation and Trade Union Behavior in a Small Open Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 84(2), pages 345-373.
    8. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
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    14. Almas Heshmati, 2003. "Productivity Growth, Efficiency and Outsourcing in Manufacturing and Service Industries," Journal of Economic Surveys, Wiley Blackwell, vol. 17(1), pages 79-112, February.
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    16. Holm, Pasi & Honkapohja, Seppo & Koskela, Erkki, 1994. "A monopoly-union model of wage determination with capital and taxes: An empirical application to the Finnish manufacturing," European Economic Review, Elsevier, vol. 38(2), pages 285-303, February.
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    Cited by:

    1. Heshmati, Almas, 2007. "Labor Market Policy Options of the Kurdistan Regional Government," IZA Discussion Papers 3247, Institute of Labor Economics (IZA).
    2. Andrea Vaona, 2010. "A survival analysis approach to the duration of union membership in Italy," Applied Economics Letters, Taylor & Francis Journals, vol. 17(11), pages 1089-1093.

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    More about this item

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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