A Nonuniform Pricing Model of Union Wages and Employment
Unlike implicit contracts models, the nonuniform pricing model of unions assumes that firms can always shut down ex post to avo id any payments to the union. Under this restriction, employment can differ from a first-best even if both workers and firms are risk neut ral. In general, the union chooses to offer quantity discounts on lab or and needs to use a seniority rule that regulates the order in whic h workers are hired to implement these discounts. Unions lower (almos t) all workers' employment probabilities and increase the cyclical vo latility of employment, and the union-nonunion average wage different ial will move countercyclically. Copyright 1988 by University of Chicago Press.
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