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Trade Union Priorities and Wage Rigidity

  • Drakopoulos, Stavros A.

The starting point of the paper is that trade unions engage in substitution once certain targets have been met. This implies that a priority-based or hierarchical model might be a better approximation to union behaviour. This model requires a two-part union utility function which changes when a satisfactory (or target) level of the priority variable (e.g. the wage rate) is met. After demonstrating the workings of such a model in a monopoly union framework, it is shown that when the wage is below the target level, there is real wage rigidity. Employment increases only when the target wage has been achieved

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File URL: http://mpra.ub.uni-muenchen.de/35791/1/MPRA_paper_35791.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 35791.

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Date of creation: May 1994
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Publication status: Published in Labour 3.8(1994): pp. 567-580
Handle: RePEc:pra:mprapa:35791
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  1. Akerlof, George A, 1969. "Relative Wages and the Rate of Inflation," The Quarterly Journal of Economics, MIT Press, vol. 83(3), pages 353-74, August.
  2. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  3. Arthur M. Ross & Kirk R. Petshek, 1950. "The tie between wages and employment," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 4(1), pages 94-101, October.
  4. Melvin W. Reder, 1960. "Job scarcity and the nature of union power," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 13(3), pages 349-362, April.
  5. 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.
  6. Lawrence H. Summers, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," NBER Working Papers 2590, National Bureau of Economic Research, Inc.
  7. Jones, Stephen R. G. & McKenna, C. J., 1989. "The effect of outsiders on union contracts," European Economic Review, Elsevier, vol. 33(8), pages 1567-1573, October.
  8. Carruth, Alan A & Oswald, Andrew J, 1987. "On Union Preferences and Labour Market Models: Insiders and Outsi ders," Economic Journal, Royal Economic Society, vol. 97(386), pages 431-45, June.
  9. Corden, W M, 1981. "Taxation, Real Wage Rigidity and Employment," Economic Journal, Royal Economic Society, vol. 91(362), pages 309-30, June.
  10. Drakopoulos, S A, 1992. "Psychological Thresholds, Demand and Price Rigidity," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(2), pages 152-68, June.
  11. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  12. Johnson, George E, 1985. " The Economic Theory of Trade Unions-An Introductory Survey: Comment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 194-96.
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