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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. Catherine C. de Fontenay & Joshua S. Gans, 2003. "Organizational Design and Technology Choice under Intrafirm Bargaining: Comment," American Economic Review, American Economic Association, vol. 93(1), pages 448-455, March.
    2. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2008. "Wages, Unemployment and Inequality with Heterogeneous Firms and Workers," NBER Working Papers 14122, National Bureau of Economic Research, Inc.
    3. William N. Cooke, 1985. "The Failure to Negotiate First Contracts: Determinants and Policy Implications," ILR Review, Cornell University, ILR School, vol. 38(2), pages 163-178, January.
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    5. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    6. Bauer, Christian & Lingens, Jörg, 2010. "Individual vs. Collective Bargaining in the Large Firm Search Model," Discussion Papers in Economics 11315, University of Munich, Department of Economics.
    7. Nickell, S J & Andrews, M, 1983. "Unions, Real Wages and Employment in Britain 1951-79," Oxford Economic Papers, Oxford University Press, vol. 35(0), pages 183-206, Supplemen.
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    More about this item

    Keywords

    BC first-contract model; mediation; collective bargaining; union; non-binding contract;
    All these keywords.

    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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