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Centralised Labour Market Negotiations

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  • Julia Müller
  • Thorsten Upmann

Abstract

This paper contributes to the analysis of central vs. decentral (firm-level) labour market negotiations. We argue that during negotiations on a central scale employers and employees plausibly take output market effects into account, while they behave competitively during firm-level negotiations. Assuming that in both cases the labour market conflict is settled efficiently according to the familiar Nash bargaining solution, we show that central negotiations lead to a lower employment level but to a higher wage rate, when compared with local labour market bargains. While this is an important theoretical result in its own, it has important effects for both empirical labour market research and labour market policies. Also, this result counters the critique that efficient negotiations result in employment levels exceeding the competitive level.

Suggested Citation

  • Julia Müller & Thorsten Upmann, 2013. "Centralised Labour Market Negotiations," CESifo Working Paper Series 4470, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4470
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    File URL: http://www.cesifo-group.de/DocDL/cesifo1_wp4470.pdf
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    References listed on IDEAS

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    1. Dowrick, Steve, 1993. "Enterprise Bargaining, Union Structure and Wages," The Economic Record, The Economic Society of Australia, vol. 69(207), pages 393-404, December.
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    3. 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.
    4. Sen, Anindya & Dutt, Amitava Krishna, 1995. "Wage bargaining, imperfect competition and the markup: Optimizing microfoundations," Economics Letters, Elsevier, vol. 48(1), pages 15-20, April.
    5. Jean-François Fagnart & Marc Germain, 1997. "Investment and technological choice in a right-to-manage model," Journal of Economics, Springer, vol. 66(3), pages 223-247, October.
    6. Thorsten Upmann & Julia Müller, 2014. "The Structure of Firm-Specific Labour Unions," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 336-385, June.
    7. Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
    8. Dobson, Paul W, 1997. "Union-Firm Interaction and the Right to Manage," Bulletin of Economic Research, Wiley Blackwell, vol. 49(3), pages 213-229, July.
    9. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
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    11. Creedy, John & McDonald, Ian M, 1991. "Models of Trade Union Behaviour: A Synthesis," The Economic Record, The Economic Society of Australia, vol. 67(199), pages 346-359, December.
    12. Cripps, Martin W, 1997. "Bargaining and the Timing of Investment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(3), pages 527-546, August.
    13. Minas Vlassis, 2003. "Wage Centralization and the Scope of Firm-Union Bargaining: 'Efficient Bargains' or 'Labour Demand'?," Manchester School, University of Manchester, vol. 71(3), pages 308-329, June.
    14. Dowrick, Steve, 1989. "Union-Oligopoly Bargaining," Economic Journal, Royal Economic Society, vol. 99(398), pages 1123-1142, December.
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    16. Hoel, Michael, 1990. " Local versus Central Wage Bargaining with Endogenous Investments," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(3), pages 453-469.
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    More about this item

    Keywords

    central labour market negotiations; efficient bargains; Nash bargaining solution; involuntary unemployment; endogenous output price; Walrasian market clearing;

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition

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