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Unemployment and the "Labour-Management Conspiracy"

Author

Listed:
  • Karp, L.
  • Paul, T.

Abstract

Management and a union bargain sequentilally, first choosing a contract which will later determine the level of employment, and then choosing a wage. The government then chooses an output subsidy, after which the industry chooses employment according to the contract. The presence of a natural turnover rate in the unionized sector creates unemployment whenever the union wage exceeds the competitive wage. Government intervention can increase both the equilibrium amount of unemployment and worsen the intersectoral allocation of labour; intervention can also reverse the relation between th eequilibrium amount of unemployment andthe flexibility of the labour market.

Suggested Citation

  • Karp, L. & Paul, T., 1998. "Unemployment and the "Labour-Management Conspiracy"," G.R.E.Q.A.M. 98a27, Universite Aix-Marseille III.
  • Handle: RePEc:fth:aixmeq:98a27
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    References listed on IDEAS

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    1. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
    2. Karp, Larry & Paul, Thierry, 2000. "Unemployment and the 'Labour-Management Conspiracy.'," Economic Journal, Royal Economic Society, vol. 110(460), pages 113-135, January.
    3. Burda, Michael C & Funke, Michael, 1992. "Trade Unions, Wages and Structural Adjustment in the New German States," CEPR Discussion Papers 652, C.E.P.R. Discussion Papers.
    4. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
    5. Dani Rodrik, 1987. "Policy Targeting with Endogenous Distortions: Theory of Optimum Subsidy Revisited," The Quarterly Journal of Economics, Oxford University Press, vol. 102(4), pages 903-911.
    6. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    7. Rodrik, Dani, 1986. "Tariffs, subsidies, and welfare with endogenous policy," Journal of International Economics, Elsevier, vol. 21(3-4), pages 285-299, November.
    8. Kiminori Matsuyama, 1990. "Export Subsidies as an Outcome of the Management-Labor Conspiracy," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 803-813.
    9. David Begg & Richard Portes, 1993. "Eastern Germany since unification: wage subsidies remain a better way," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(4), pages 383-400, December.
    10. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
    11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
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    Cited by:

    1. Karp, Larry & Paul, Thierry, 2000. "Unemployment and the 'Labour-Management Conspiracy.'," Economic Journal, Royal Economic Society, vol. 110(460), pages 113-135, January.

    More about this item

    Keywords

    UNEMPLOYMENT ; WAGES ; BARGAINING ; SUBSIDIES;

    JEL classification:

    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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