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An Empirical Test of an Asymmetric Information Model of Strikes

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  • Joseph S. Tracy

Abstract

Recent developments in the thoery of strategic bargaining demonstrate howinformational asymmetries can lead to prolonged and costly bargaining. These models can be applied to contract negotiations between unions and firms yielding an economic theory of strikes. To date, however, few empirical tests of these models have been carried out. This paper presents some evidence supporting this view of strikes. A set of predictions concerning the incidence and unconditional duration of strikes is derived from a simple bargaining model where the union is uncertain about the firm's future profitability. These predictions are then tested on a micro data set of major U.S. contract negotiations which took place from 1973 to 1977.

Suggested Citation

  • Joseph S. Tracy, 1986. "An Empirical Test of an Asymmetric Information Model of Strikes," NBER Working Papers 1870, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1870
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    1. Masanori Hashimoto & Ben T. Yu, 1980. "Specific Capital, Employmemt Contracts, and Wage Rigidity," Bell Journal of Economics, The RAND Corporation, vol. 11(2), pages 536-549, Autumn.
    2. Hall, Robert E & Lazear, Edward P, 1984. "The Excess Sensitivity of Layoffs and Quits to Demand," Journal of Labor Economics, University of Chicago Press, vol. 2(2), pages 233-257, April.
    3. Gary S. Becker, 1962. "Investment in Human Capital: A Theoretical Analysis," Journal of Political Economy, University of Chicago Press, vol. 70, pages 1-9.
    4. Hayes, Beth, 1984. "Unions and Strikes with Asymmetric Information," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 57-83, January.
    5. Harris Milton & Townsend, Robert M, 1981. "Resource Allocation under Asymmetric Information," Econometrica, Econometric Society, vol. 49(1), pages 33-64, January.
    6. Fama, Eugene F, et al, 1969. "The Adjustment of Stock Prices to New Information," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(1), pages 1-21, February.
    7. Christopher J. Flinn & James J. Heckman, 1982. "Models for the Analysis of Labor Force Dynamics," NBER Working Papers 0857, National Bureau of Economic Research, Inc.
    8. repec:fth:prinin:147 is not listed on IDEAS
    9. Jarrell, Gregg A, 1981. "The Economic Effects of Federal Regulation of the Market for New Security Issues," Journal of Law and Economics, University of Chicago Press, vol. 24(3), pages 613-675, December.
    10. John G. Cragg & Russell S. Uhler, 1970. "The Demand for Automobiles," Canadian Journal of Economics, Canadian Economics Association, vol. 3(3), pages 386-406, August.
    11. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
    12. Michael G. Abbott, 1982. "Specification Tests of Quarterly Econometric Models of Aggregate Strike Frequency in Canada," Working Papers 527, Princeton University, Department of Economics, Industrial Relations Section..
    13. repec:pri:indrel:dsp01k0698750j is not listed on IDEAS
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