Theory of Collusion in the Labor Market
Despite the major concern of the competition authority to forbid and prosecute formal cartels who cooperatively fix prices, limit production or divide markets, there seems to be little regulation and investigation of collusive practices in the labor market. For that reason, this article analyzes the economic effects of cooperative wage fixing in industries that use one type of labor as the only input, while the other assumptions are kept as general as possible. Under the one input assumption it was found that collusion in the labor market and collusion in the product market have exactly the same results, which include the rise in prices and the fall in output, employment and wages. The higher prices and lower wages in cartelized industries are not only associated with the elimination of the well known business stealing effect, but also with the elimination of the labor force stealing effect. The conclusions in this paper can be generalized to industries that use more than one input, as long as the cartel is able to fix the prices of all the inputs.
|Date of creation:||Jan 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Rua Dr. Roberto Frias, 4200 PORTO|
Web page: http://www.fep.up.pt/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Fabian Bergès-Sennou & Stéphane Caprice, 2008.
"Is Competition or Collusion in the Product Market Relevant for Labour Markets?,"
Recherches économiques de Louvain,
De Boeck Université, vol. 74(3), pages 273-298.
- Bergès-Sennou, F. & Caprice, S., 2004. "Is competition or collusion in the product market relevant for labour markets ?," Economics Working Paper Archive (Toulouse) 200412, French Institute for Agronomy Research (INRA), Economics Laboratory in Toulouse (ESR Toulouse).
- Fabian BERGÈS & Stéphane CAPRICE, 2008. "Is Competition or Collusion in the Product Market Relevant for Labour Markets?," Discussion Papers (REL - Recherches Economiques de Louvain) 2008032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- James W. Friedman, 1971. "A Non-cooperative Equilibrium for Supergames," Review of Economic Studies, Oxford University Press, vol. 38(1), pages 1-12.
- Natalya Y. Shelkova, 2008. "Low-Wage Labor Markets and the Power of Suggestion," Working papers 2008-33, University of Connecticut, Department of Economics, revised Dec 2008.
- Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
- Arijit Mukherjee & Luís Vasconcelos, 2012. "Star Wars: Exclusive Talent and Collusive Outcomes in Labor Markets," Journal of Law, Economics and Organization, Oxford University Press, vol. 28(4), pages 754-782, October.
When requesting a correction, please mention this item's handle: RePEc:por:fepwps:477. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.