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Efficient and Inefficient Employment Outcomes: A Study Based on Canadian Data

  • Louis N. Christofides
  • Andrew J. Oswald

This paper estimates employment equations based on the traditional labour demand model and modern efficient bargain theory using data drawn from wage contracts signed in the Canadian private unionized sector between 1978 and 1984. Contrary to the labour demand model predictions, the alternative wage rate is consistently significant and has the negative coefficient predicted by efficient bargain theory. Though a credible labour demand model can sometimes be estimated, the results are sensitive to the assumed market structure and to the introduction of alternative wage and unemployment insurance variables. Non-nested tests favour efficient bargain specifications.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3648.

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Date of creation: Mar 1991
Date of revision:
Handle: RePEc:nbr:nberwo:3648
Note: LS
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  1. Farber, Henry S, 1978. "Individual Preferences and Union Wage Determination: The Case of the United Mine Workers," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 923-42, October.
  2. Oswald, Andrew J., 1993. "Efficient contracts are on the labour demand curve : Theory and facts," Labour Economics, Elsevier, vol. 1(1), pages 85-113, June.
  3. Carruth, Alan A & Oswald, Andrew J, 1985. "Miners' Wages in Post-war Britain: An Application of a Model of Trade Union Behaviour," Economic Journal, Royal Economic Society, vol. 95(380), pages 1003-20, December.
  4. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 37-50, January.
  5. Dertouzos, James N & Pencavel, John H, 1981. "Wage and Employment Determination under Trade Unionism: The International Typographical Union," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1162-81, December.
  6. Martinello, F., 1988. "Wage And Employment Determination In A Unionized Industry; The Iwa And The B.C. Wood Products Industry," Working Papers 1988-01, Brock University, Department of Economics.
  7. Svejnar, J., 1984. "Bargaining power, fear of disagreement and wage settlements: theory and evidence from U.S. industry," CORE Discussion Papers 1984037, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  8. Alogoskoufis, George & Manning, Alan, 1991. "Tests of alternative wage employment bargaining models with an application to the UK aggregate labour market," European Economic Review, Elsevier, vol. 35(1), pages 23-37, January.
  9. David Card, 1988. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," Working Papers 612, Princeton University, Department of Economics, Industrial Relations Section..
  10. Bean, Charles R & Turnbull, Peter J, 1988. "Employment in the British Coal Industry: A Test of the Labour Demand Model," Economic Journal, Royal Economic Society, vol. 98(393), pages 1092-1104, December.
  11. Louis N. Christofides & Andrew J. Oswald, 1989. "Real Wage Determinatioan in Collective BArgaining Agreements," NBER Working Papers 3188, National Bureau of Economic Research, Inc.
  12. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S3-S39, June.
  13. Hendricks, Wallace E & Kahn, Lawrence M, 1991. "Efficiency Wages, Monopoly Unions and Efficient Bargaining," Economic Journal, Royal Economic Society, vol. 101(408), pages 1149-62, September.
  14. Christofides, L.N., 1989. "Non-Nested Tests Of Efficient Bargain And Labour Demand Models," Working Papers 1989-7, University of Guelph, Department of Economics and Finance.
  15. Martyn Andrews & Alan Harrison, . "Testing for Efficient Contracts in Unionized Labour Market," Canadian International Labour Network Working Papers 12, McMaster University.
  16. Christofides, Louis N & Swidinsky, Robert & Wilton, David A, 1980. "A Microeconometric Analysis of the Canadian Wage Determination Process," Economica, London School of Economics and Political Science, vol. 47(186), pages 165-78, May.
  17. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  18. Pencavel, John, 1985. " Wages and Employment under Trade Unionism: Microeconomic Models and Macroeconomic Applications," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 197-225.
  19. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
  20. Grossman, Sanford J & Hart, Oliver D, 1981. "Implicit Contracts, Moral Hazard, and Unemployment," American Economic Review, American Economic Association, vol. 71(2), pages 301-07, May.
  21. Abowd, John M, 1989. "The Effect of Wage Bargains on the Stock Market Value of the Firm," American Economic Review, American Economic Association, vol. 79(4), pages 774-800, September.
  22. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
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