A Union-Oligopoly Model of Endogenous Discrimination:Should it be wage discrimination taxed or discriminated employment subsidized?
In the context of a homogenous good industry with Cournot rivalry and technological asymmetries among firms, equally skilled workers can be grouped according to their different reservation wages. Under decentralized firm-union bargaining, we show that unions may offer to firms the option to discriminate wages across such groups of employees and, by that, to achieve cost sub-additivity in the equilibrium. We subsequently propose that to combat the emerging wage discrimination a benevolent policy maker may activate either taxation, or subsidization, policy. Interestingly, while the former policy always entails a welfare loss, a welfare gain may emerge under the latter policy, relative to the no policy-wage discrimination status quo. Thus our findings suggest that the E.U- antidiscrimination directives may prove to be effective on both egalitarian and efficiency grounds.
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- Swinton, David H, 1977. "A Labor Force Competition Theory of Discrimination in the Labor Market," American Economic Review, American Economic Association, vol. 67(1), pages 400-404, February.
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- Timothy Hinks & Duncan Watson, 2001. "A multinomial logit nondiscriminatory approach to estimating racial wage and occupational discrimination," Applied Economics, Taylor & Francis Journals, vol. 33(5), pages 605-612.
- Emmanuel Petrakis & Minas Vlassis, 2004.
"Endogenous wage bargaining institutions in oligopolistic sectors,"
Springer, vol. 24(1), pages 55-73, 07.
- Emmanuel Petrakis & Minas Vlassis, . "Endogenous Wage-Bargaining Institutions in Oligopolistic Sectors," Working Papers 0105, University of Crete, Department of Economics, revised 00 Dec 2001.
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