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Strikes and Slowdown in a Theory of Relational Contracts

Author

Listed:
  • Robert Gary-Bobo

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, UP1 UFR02 - Université Paris 1 Panthéon-Sorbonne - UFR d'Économie - UP1 - Université Paris 1 Panthéon-Sorbonne)

  • Touria Jaaidane

    (Université de Lille, Sciences et Technologies)

Abstract

We propose a model of strikes in a relational (or self-enforcing) contract framework. The employer has private information about firm profitability, proposes a wage and a bonus, and can outsource part of the production, in each period. The union can either go on strike or reduce the worker's effort (i.e., decide a slowdown or work-to-rule) as a response to a low wage or a low bonus. We construct perfect public equilibria in which strikes (or slowdown) appear randomly on the equilibrium path, during finite-duration spells triggered by the occurrence of a low-profitability state. Equilibria exhibit money-burning (i.e., conflict) and wage-compression as in the recent literature on relational contracts; they are first-best inefficient. We discuss empirical implications of the model and applications to the public sector. Paris dustmen are taken as an illustration. An important advantage of our theory is that it allows for equilibrium regime changes, induced by changes in the environment. Following a drop in outsourcing costs, strikes may disappear and be replaced by other forms of conflict that are less easily observable. This has consequences for the empirical work on strikes

Suggested Citation

  • Robert Gary-Bobo & Touria Jaaidane, 2014. "Strikes and Slowdown in a Theory of Relational Contracts," Post-Print hal-03572069, HAL.
    • Handle: RePEc:hal:journl:hal-03572069
    DOI: 10.1016/j.ejpoleco.2014.07.002
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    Cited by:

    1. Jaaidane, Touria & Musy, Olivier & Tallec, Ronan, 2022. "Rent-seeking, Reform and Conflict: French Parliaments at the End of the Ancien Régime," MPRA Paper 112067, University Library of Munich, Germany.
    2. Fahn, Matthias & Hadjer, Tahmina, 2015. "Optimal contracting with private military and security companies," European Journal of Political Economy, Elsevier, vol. 37(C), pages 220-240.
    3. Alberto Vesperoni & Anıl Yıldızparlak, 2019. "Inequality and conflict outbreak," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 53(1), pages 135-173, June.
    4. Zhao, Chuan & Peng, Lin & Dong, Kangyin & Yang, Haoxiong, 2024. "Government policies on port resilience amid strike events—A two-stage Van Damme based tripartite evolutionary game," Transportation Research Part A: Policy and Practice, Elsevier, vol. 188(C).

    More about this item

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • J45 - Labor and Demographic Economics - - Particular Labor Markets - - - Public Sector Labor Markets
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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