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International Competition and the Unionized Sector

  • Gene M. Grossman

This paper studies the wage and employment behavior of a unionized sector that is confronted by an intensification of international competition. After developing a formal model of a monopoly union subject to majority rule, I study the response of a unionized sector operating under a seniority rule for layoffs and rehires to a trend decrease in the international price of its output. Conditions are provided to validate the casual argument that majority voting in unions and the seniority system together provide an explanation for the lack of union wage adjustment. A modified version of the model allows the job queue to deviate from a strict seniority ranking. In this context I ask, what importance can be attached to the seniority system in determining the wage response to international competition?

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 0899.

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Date of creation: Jun 1982
Date of revision:
Publication status: published as Grossman, Gene M. "International Competition and the Unionized Sector." Canadian Journal of Economics, Vol. 17, No. 3, (August 1984), pp. 541-556.
Handle: RePEc:nbr:nberwo:0899
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  1. J. Bhagwati & T. N. Srinivasan, 1973. "Alternative Policy Rankings in a Large, Open Economy with Sector-Specific, Minimum Wages," Working papers 109, Massachusetts Institute of Technology (MIT), Department of Economics.
  2. Hall, Robert E & Lilien, David M, 1979. "Efficient Wage Bargains under Uncertain Supply and Demand," American Economic Review, American Economic Association, vol. 69(5), pages 868-79, December.
  3. J. Bhagwati & T. N. Srinivasan, 1973. "On Reanalyzing the Harris-Todaro Model: Policy Rankings in the case of Sector-Specific Sticky Wages," Working papers 99, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Calvo, Guillermo A, 1978. "Urban Employment and Wage Determination in LDC's: Trade Unions in the Harris-Todaro Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(1), pages 65-81, February.
  5. Richard B. Freeman, 1978. "Unionism and the Dispersion of Wages," NBER Working Papers 0248, National Bureau of Economic Research, Inc.
  6. John M. Abowd & Henry S. Farber, 1982. "Job queues and the union status of workers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 35(3), pages 354-367, April.
  7. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  8. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  9. Corden, W M & Findlay, Ronald, 1975. "Urban Unemployment, Intersectoral Capital Mobility and Development Policy," Economica, London School of Economics and Political Science, vol. 42(165), pages 59-78, February.
  10. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  11. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  12. Farrell Bloch & Mark S. Kuskin, 1978. "Wage determination in the union and nonunion sectors," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 31(2), pages 183-192, January.
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