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Is Unemployment Lower If Unions Bargain Over Employment?


  • LAYARD, R.


We consider an economy in which all firms are unionized and bargain with their own union. (1) If unions bargain over employment as well as wages, employment will be the same as if they bargain over wages only, provided that the production function is Cobb-Douglas. (Employment will be higher if the elasticity of substitution between labor and capital is smaller than unity.) (2) If we start from a fully competitive labor market and then move to one of efficient bargaining (over wages and employment), employment falls. This is so even if the marginal utility of income is constant, so that bargaining is "strongly efficient."
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Suggested Citation

  • Layard, R. & Nickell, S., 1988. "Is Unemployment Lower If Unions Bargain Over Employment?," Papers 308, London School of Economics - Centre for Labour Economics.
  • Handle: RePEc:fth:lseple:308

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    References listed on IDEAS

    1. Kemal Dervis & Peter A. Petri, 1987. "The Macroeconomics of Successful Development: What Are The Lessons?," NBER Chapters,in: NBER Macroeconomics Annual 1987, Volume 2, pages 211-262 National Bureau of Economic Research, Inc.
    2. Buiter, Willem H, 1988. "Structural and Stabilization Aspects of Fiscal and Financial Policy in the Dependent Economy," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 220-245, June.
    3. Van Wijnbergen, Sweder, 1986. "Exchange rate management and stabilization policies in developing countries," Journal of Development Economics, Elsevier, vol. 23(2), pages 227-247, October.
    4. Edward, Sebastian, 1986. "Are Devaluations Contractionary?," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 501-508, August.
    5. Jonathan Eaton & Mark Gersovitz & Joseph E. Stiglitz, 1991. "The Pure Theory of Country Risk," NBER Chapters,in: International Volatility and Economic Growth: The First Ten Years of The International Seminar on Macroeconomics, pages 391-435 National Bureau of Economic Research, Inc.
    6. Buiter, Willem H., 1986. "Macroeconomic Responses by Developing Countries to Changes in External Economic Conditions," CEPR Discussion Papers 93, C.E.P.R. Discussion Papers.
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    unemployment ; wages ; trade unions ; competition;


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