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Work Rules, Featherbedding, and Pareto-Optimal Union Management Bargaining

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  • George E. Johnson

Abstract

The recent literature on the economic behavior of unions is dominated by a controversy over whether or not bargaining is Pareto optimal. If unions care about employment as well as wages, efficient bargains between unions and management "should" involve both these variables rather than only wages. In fact, explicit bargaining over employment levels is virtually unknown. There is, however, implicit bargaining over employment in the form of rules concerning the labor/capital ratio, job assignment, work speeds, and the like.This paper examines a model of "semi-efficient" bargaining in which the unionand the firm bargain over wages and various types of work rules. The results are compared to the outcomes that are associated with fully efficient bargaining (i.e, over wages and the level of employment) and bargaining solely over wages. Of particular interest is the case in which the union and the firm mutually consent to "feather bedding" agreements (requiring the hiring of workers with zero marginal product). The major conclusion of the paper is that the outcome of collective bargaining is different in the case of negotiations over work rules and wages than in both the cases of fully efficient bargaining and of bargaining solely over wages. In general, however, the outcome of this "partially efficient" bargaining process is closer to the outcome of bargaining solely over wages than to that associated with fully efficient bargaining over both wages and employment.

Suggested Citation

  • George E. Johnson, 1986. "Work Rules, Featherbedding, and Pareto-Optimal Union Management Bargaining," NBER Working Papers 1820, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1820
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    Cited by:

    1. Blanchflower, David G & Oswald, Andrew J & Garrett, Mario D, 1990. "Insider Power in Wage Determination," Economica, London School of Economics and Political Science, vol. 57(226), pages 143-170, May.
    2. Hirsch, Barry T. & Prasad, Kislaya, 1995. "Wage-employment determination and a union tax on capital: Can theory and evidence be reconciled?," Economics Letters, Elsevier, vol. 48(1), pages 61-71, April.
    3. Bridgman, Benjamin, 2015. "Competition, work rules and productivity," Journal of Economic Dynamics and Control, Elsevier, vol. 52(C), pages 136-149.
    4. Julia Darby & Robert A. Hart, 2008. "Wages, Productivity, and Work Intensity in the Great Depression," Southern Economic Journal, Southern Economic Association, vol. 75(1), pages 91-103, July.
    5. Daniel, Christophe & Sofer, Catherine, 1998. "Bargaining, Compensating Wage Differentials, and Dualism of the Labor Market: Theory and Evidence for France," Journal of Labor Economics, University of Chicago Press, vol. 16(3), pages 546-575, July.
    6. Hogan, Chad, 2001. "Enforcement of Implicit Employment Contracts through Unionization," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 171-195, January.
    7. William T. Dickens, 1990. "Does It Matter What We Trade? Trade and Industrial Policies When Labor Markets Don't Clear," NBER Working Papers 3285, National Bureau of Economic Research, Inc.
    8. Elena Podrecca, 2013. "Riforme del mercato dei prodotti e crescita della produttività. Teoria ed evidenza empirica," ECONOMIA E SOCIETÀ REGIONALE, FrancoAngeli Editore, vol. 2013(2), pages 10-41.
    9. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
    10. Beissinger, Thomas & Baudy, Philipp, 2015. "The Impact of Temporary Agency Work on Trade Union Wage Setting: A Theoretical Analysis," IZA Discussion Papers 8802, Institute for the Study of Labor (IZA).
    11. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
    12. Falch, Torberg, 2001. "Collective bargaining in the public sector and the role of budget determination," European Journal of Political Economy, Elsevier, vol. 17(1), pages 75-99, March.
    13. V. Rattini, 2016. "Managing the Workload: an Experiment on Individual Decision Making and Performance," Working Papers wp1080, Dipartimento Scienze Economiche, Universita' di Bologna.
    14. Haskel, Jonathan & Sanchis, Amparo, 2000. "A bargaining model of Farrell inefficiency," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 539-556, May.
    15. Adriana Cassoni, 1996. "A bargaining model with uncertainty and varying outside opportunities," Documentos de Trabajo (working papers) 1096, Department of Economics - dECON.
    16. Darby, Julia & Hart, Robert A. & Vecchi, Michela, 2001. "Wages, work intensity and unemployment in Japan, UK and USA," Labour Economics, Elsevier, vol. 8(2), pages 243-258, May.
    17. William T. Dickens, 1995. "Do Labor Rents Justify Strategic Trade and Industrial Policy?," NBER Working Papers 5137, National Bureau of Economic Research, Inc.
    18. Klasa, Sandy & Maxwell, William F. & Ortiz-Molina, Hernán, 2009. "The strategic use of corporate cash holdings in collective bargaining with labor unions," Journal of Financial Economics, Elsevier, vol. 92(3), pages 421-442, June.
    19. Janet Currie Neelin, 1989. "What Do (Public Sector) Unions Do? Wage and Employment Determination Among Ontario Public School Teachers," UCLA Economics Working Papers 542, UCLA Department of Economics.
    20. Menezes-Filho, Naercio & Van Reenen, John, 2003. "Unions and Innovation: A Survey of the Theory and Empirical Evidence," CEPR Discussion Papers 3792, C.E.P.R. Discussion Papers.
    21. Petrakis, Emmanuel & Vlassis, Minas, 1996. "Endogenous scope of bargaining in oligopoly," UC3M Working papers. Economics 3978, Universidad Carlos III de Madrid. Departamento de Economía.

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