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Trade Union Priorities and Wage Rigidity

Author

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  • Drakopoulos, Stavros A.

Abstract

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

Suggested Citation

  • Drakopoulos, Stavros A., 1994. "Trade Union Priorities and Wage Rigidity," MPRA Paper 35791, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:35791
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    File URL: https://mpra.ub.uni-muenchen.de/35791/1/MPRA_paper_35791.pdf
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    References listed on IDEAS

    as
    1. George A. Akerlof, 1969. "Relative Wages and the Rate of Inflation," The Quarterly Journal of Economics, Oxford University Press, vol. 83(3), pages 353-374.
    2. 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.
    3. Summers, Lawrence H, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 383-388, May.
    4. 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 431-445, June.
    5. Johnson, George E, 1985. " The Economic Theory of Trade Unions-An Introductory Survey: Comment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 194-196.
    6. Drakopoulos, S A, 1992. "Psychological Thresholds, Demand and Price Rigidity," The Manchester School of Economic & Social Studies, University of Manchester, vol. 60(2), pages 152-168, June.
    7. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    8. 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 3-39, June.
    9. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
    10. Corden, W M, 1981. "Taxation, Real Wage Rigidity and Employment," Economic Journal, Royal Economic Society, vol. 91(362), pages 309-330, June.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Trade Unions; Wages;

    JEL classification:

    • D70 - Microeconomics - - Analysis of Collective Decision-Making - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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