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Strikes and Wages: A Test of a Signalling Model

  • David Card

This paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the level of profitability of the firm. The implications of the model are then tested using data on wage outcomes, strike probabilities, and strike durations for a large sample of collective bargaining agreements. Negotiated wages are found to depend negatively on regional unemployment rates and positively on industry-specific selling prices. Contrary to the basic premise of the model, however, there is no evidence of a systematic relation between wages and strike outcomes. Increases in unemployment are found to decrease the probability of strikes, while increases in industry selling prices increase the probability of disputes. Strike durations are only weakly related to unemployment and industry prices, but are negatively correlated with industry output.

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File URL: http://www.nber.org/papers/w2550.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2550.

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Date of creation: Mar 1988
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Publication status: published as "Strikes and Wages: A Test of an Asymmetric Information Model," Quarterly Journal of Economics, Vol. 110, No. 3, pp. 625-659, (August 1990).
Handle: RePEc:nbr:nberwo:2550
Note: LS
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  1. Christofides, Louis N & Swidinsky, Robert & Wilton, David A, 1980. "A Microeconometric Analysis of Spillovers within the Canadian Wage Determination Process," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 213-21, May.
  2. Hayes, Beth, 1984. "Unions and Strikes with Asymmetric Information," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 57-83, January.
  3. Sheena McConnell, 1987. "Cyclical Fluctuations in Strike Activity," Working Papers 595, Princeton University, Department of Economics, Industrial Relations Section..
  4. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1988. "Estimating Vector Autoregressions with Panel Data," Econometrica, Econometric Society, vol. 56(6), pages 1371-95, November.
  5. Fudenberg, Drew & Tirole, Jean, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Wiley Blackwell, vol. 50(2), pages 221-47, April.
  6. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
  7. Lawrence M. Ausubel & Peter Cramton & Raymond J. Deneckere, 2002. "Bargaining with Incomplete Information," Papers of Peter Cramton 02barg, University of Maryland, Department of Economics - Peter Cramton, revised 12 Mar 2001.
  8. Jones, Stephen R G, 1988. "The Relationship between Unemployment Spells and Reservation Wages as a Test of Search Theory," The Quarterly Journal of Economics, MIT Press, vol. 103(4), pages 741-65, November.
  9. Gunderson, Morley & Kervin, John & Reid, Frank, 1986. "Logit Estimates of Strike Incidence from Canadian Contract Data," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 257-76, April.
  10. David Card, 1983. "Cost-of-living escalators in major union contracts," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 37(1), pages 34-48, October.
  11. Riddell, William Craig, 1979. "The Empirical Foundations of the Phillips Curve: Evidence from Canadian Wage Contract Data," Econometrica, Econometric Society, vol. 47(1), pages 1-24, January.
  12. Chamberlain, Gary, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Wiley Blackwell, vol. 47(1), pages 225-38, January.
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