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A Model of Union Formation


  • Westermark, Andreas

    () (Department of Economics)


In an analysis of the formation of unions within a single firm, this paper addresses conditions under which encompassing unions form. It is shown that a production function satisfying decreasing marginal productivity leads to the formation of encompassing unions. This result holds for different ways of dividing the surplus within the union. The effects of changes in heterogeneity, e.g. increased demand for skilled labor, are also analyzed. In the most reasonable setup, a change in heterogeneity does not affect the decision whether to form a union or not. This contrasts with the result in Jun (1989).

Suggested Citation

  • Westermark, Andreas, 1999. "A Model of Union Formation," Working Paper Series 1999:8, Uppsala University, Department of Economics.
  • Handle: RePEc:hhs:uunewp:1999_008

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    References listed on IDEAS

    1. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-497, June.
    2. Gul, Faruk, 1989. "Bargaining Foundations of Shapley Value," Econometrica, Econometric Society, vol. 57(1), pages 81-95, January.
    3. Richard Freeman & Jeffrey Pelletier, 1990. "The Impact of Industrial Relations Legislation on British Union Density," British Journal of Industrial Relations, London School of Economics, vol. 28(2), pages 141-164, July.
    4. Drew Fudenberg & Jean Tirole, 1991. "Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262061414, July.
    5. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
    6. Bernheim, B. Douglas & Peleg, Bezalel & Whinston, Michael D., 1987. "Coalition-Proof Nash Equilibria I. Concepts," Journal of Economic Theory, Elsevier, vol. 42(1), pages 1-12, June.
    7. Byoung Heon Jun, 1989. "Non-cooperative Bargaining and Union Formation," Review of Economic Studies, Oxford University Press, vol. 56(1), pages 59-76.
    8. Nickell, Stephen & Bell, Brian, 1995. "The Collapse in Demand for the Unskilled and Unemployment across the OECD," Oxford Review of Economic Policy, Oxford University Press, vol. 11(1), pages 40-62, Spring.
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    Cited by:

    1. Klaas J. Beniers & Robert A.J. Dur, 2003. "Product Market Competition and Trade Union Structure," Tinbergen Institute Discussion Papers 03-005/1, Tinbergen Institute, revised 26 Aug 2003.
    2. John Kennan, 2001. "Uniqueness of Positive Fixed Points for Increasing Concave Functions on Rn: An Elementary Result," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(4), pages 893-899, October.
    3. Marco Maffezzoli, 2001. "Non-Walrasian Labor Markets and Real Business Cycles," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 4(4), pages 860-892, October.
    4. Ester Faia & Lorenza Rossi, 2013. "Union Power, Collective Bargaining, And Optimal Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 408-427, January.
    5. Eriksson, Stefan & Gottfries, Nils, 2005. "Ranking of job applicants, on-the-job search, and persistent unemployment," Labour Economics, Elsevier, vol. 12(3), pages 407-428, June.

    More about this item


    Union; Heterogeneity; Labor;

    JEL classification:

    • D20 - Microeconomics - - Production and Organizations - - - General
    • D33 - Microeconomics - - Distribution - - - Factor Income Distribution
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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