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The Economics of First-Contract Mediation

Author

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  • Dobbelaere, Sabien

    (Vrije Universiteit Amsterdam)

  • Luttens, Roland Iwan

    (University of Amsterdam)

Abstract

This paper provides an economic foundation for non-binding mediation to stimulate first collective bargaining agreements, as implemented in British Columbia since 1993. We show that the outcome of first-contract mediation is Pareto efficient and proves immune to the insider-outsider problem of underhiring. We also demonstrate that equilibrium wages and profits under mediation coincide with the Owen values of the corresponding cooperative game with the coalitional structure that follows from unionization.

Suggested Citation

  • Dobbelaere, Sabien & Luttens, Roland Iwan, 2013. "The Economics of First-Contract Mediation," IZA Discussion Papers 7541, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp7541
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    References listed on IDEAS

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    1. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-497, June.
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    Keywords

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    JEL classification:

    • C71 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Cooperative Games
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law

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