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Collective Bargaining and the Division of the Value of the Enterprise


  • John M. Abowd


The enterprise (firm) is modeled as a collection of formal and informal contracts providing various factors of production with claims on the income stream in consideration of assets or services supplied to the enterprise. The strongly efficient bargaining model implies that the division of the quasi-rents will result in dollar for dollar exchanges of wealth between the union members and the shareholders. The leading inefficient bargaining models do not imply such tradeoffs in general. The model is tested by considering contract settlements during the years 1976 to 1982 as recorded by the Bureau of National Affairs in Collective Bargaining Negotiations and Contracts. Security price data for the firms were merged with these bargaining unit level settlement data. The tests provide substantial confirmation of the dollar for dollar wealth tradeoff between union members and shareholders.

Suggested Citation

  • John M. Abowd, 1987. "Collective Bargaining and the Division of the Value of the Enterprise," NBER Working Papers 2137, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2137
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    References listed on IDEAS

    1. Duncan, Greg J & Stafford, Frank P, 1980. "Do Union Members Receive Compensating Wage Differentials?," American Economic Review, American Economic Association, vol. 70(3), pages 355-371, June.
    2. Freeman, Richard B, 1984. "Longitudinal Analyses of the Effects of Trade Unions," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 1-26, January.
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    5. Lazear, Edward P, 1976. "Age, Experience, and Wage Growth," American Economic Review, American Economic Association, vol. 66(4), pages 548-558, September.
    6. Gary Solon, 1986. "Bias in Longitudinal Estimation of Wage Gaps," NBER Technical Working Papers 0058, National Bureau of Economic Research, Inc.
    7. Douglas Holtz-Eakin & Whitney K. Newey & Harvey S. Rosen, 1989. "Implementing Causality Tests with Panel Data, with an Example from LocalPublic Finance," NBER Technical Working Papers 0048, National Bureau of Economic Research, Inc.
    8. Duncan, Greg J & Hill, Daniel H, 1985. "An Investigation of the Extent and Consequences of Measurement Error in Labor-Economic Survey Data," Journal of Labor Economics, University of Chicago Press, vol. 3(4), pages 508-532, October.
    9. Charles Brown, 1980. "Equalizing Differences in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 94(1), pages 113-134.
    10. Chowdhury, Gopa & Nickell, Stephen, 1985. "Hourly Earnings in the United States: Another Look at Unionization, Schooling, Sickness, and Unemployment Using PSID Data," Journal of Labor Economics, University of Chicago Press, vol. 3(1), pages 38-69, January.
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    Cited by:

    1. Card, David, 1990. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," American Economic Review, American Economic Association, vol. 80(4), pages 669-688, September.
    2. Johnson, George E, 1990. "Work Rules, Featherbedding, and Pareto-optimal Union-Management Bargaining," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 237-259, January.
    3. William T. Dickens & Lawrence F. Katz, 1986. "Interindustry Wage Differences and Industry Characteristics," NBER Working Papers 2014, National Bureau of Economic Research, Inc.
    4. Dorothee Schneider, 2011. "The Labor Share: A Review of Theory and Evidence," SFB 649 Discussion Papers SFB649DP2011-069, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    5. John M. Abowd & Joseph S. Tracy, 1988. "Market Structure, Strike Activity, and Union Wage Settlements," NBER Working Papers 2595, National Bureau of Economic Research, Inc.
    6. Stewart, Mark B, 1990. "Union Wage Differentials, Product Market Influences and the Division of Rents," Economic Journal, Royal Economic Society, vol. 100(403), pages 1122-1137, December.
    7. 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.
    8. Erica L. Groshen, 1988. "Why do wages vary among employers?," Economic Review, Federal Reserve Bank of Cleveland, issue Q I, pages 19-38.
    9. H. Osano & T. Inoue, 1988. "Testing Between Competing Models of Business Cycles: The Efficient Long-Term Contract Hypothesis Versus the Intertemporal Substitution Hypothesis," Discussion Papers 768, Northwestern University, Center for Mathematical Studies in Economics and Management Science.

    More about this item

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models


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