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Collective Bargaining and the Division of the Value of the Enterprise

Listed author(s):
  • 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.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2137.

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Date of creation: Jan 1987
Publication status: published as "The Effect of Wage Bargains on the Stock Market Value of the Firm" From The American Economic Review, Vol. 79, No. 4, pp. 774-800, (September 1989)
Handle: RePEc:nbr:nberwo:2137
Note: LS
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