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Strikes and Wages: A Test of a Signalling Model

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  • David Card

Abstract

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.

Suggested Citation

  • David Card, 1988. "Strikes and Wages: A Test of a Signalling Model," NBER Working Papers 2550, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:2550
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    References listed on IDEAS

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    1. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
    2. Ausubel, Lawrence M. & Cramton, Peter & Deneckere, Raymond J., 2002. "Bargaining with incomplete information," Handbook of Game Theory with Economic Applications,in: R.J. Aumann & S. Hart (ed.), Handbook of Game Theory with Economic Applications, edition 1, volume 3, chapter 50, pages 1897-1945 Elsevier.
    3. Sheena McConnell, 1987. "Cyclical Fluctuations in Strike Activity," Working Papers 595, Princeton University, Department of Economics, Industrial Relations Section..
    4. 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.
    5. Hayes, Beth, 1984. "Unions and Strikes with Asymmetric Information," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 57-83, January.
    6. Stephen R. G. Jones, 1988. "The Relationship Between Unemployment Spells and Reservation Wages as a Test of Search Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 103(4), pages 741-765.
    7. K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
    8. 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 257-276, April.
    9. 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 213-221, May.
    10. Drew Fudenberg & Jean Tirole, 1983. "Sequential Bargaining with Incomplete Information," Review of Economic Studies, Oxford University Press, vol. 50(2), pages 221-247.
    11. Sheena McConnell, 1987. "Cyclical Fluctuations in Strike Activity," Working Papers 595, Princeton University, Department of Economics, Industrial Relations Section..
    12. repec:fth:prinin:215 is not listed on IDEAS
    13. Gary Chamberlain, 1980. "Analysis of Covariance with Qualitative Data," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 225-238.
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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. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
    3. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
    4. Michael Huberman & Denise Young, 1995. "What Did Unions Do... An Analysis of Canadian Strike Data, 1901-14," CIRANO Working Papers 95s-17, CIRANO.
    5. Cramton, Peter C & Tracy, Joseph S, 1994. "Wage Bargaining with Time-Varying Threats," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 594-617, October.
    6. Jellal, Mohamed, 2014. "Theory of civil war under asymmetric information," MPRA Paper 57600, University Library of Munich, Germany.
    7. John M. Abowd & Thomas Lemieux, 1991. "The Effects of International Competition on Collective Bargaining Outcomes: A Comparison of the United States and Canada," NBER Chapters,in: Immigration, Trade, and the Labor Market, pages 343-367 National Bureau of Economic Research, Inc.

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