IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/77562.html
   My bibliography  Save this paper

Dynamic collective bargaining. Frictional effects under open-shop industrial relations

Author

Listed:
  • Cabo, Francisco
  • Martín-Román, Ángel L.

Abstract

A dynamic Stackelberg game analyzes collective bargaining between a trade union (leader) and a firm (follower) in a monopoly union model. Frictional effects (FE) for the firm encompass symmetric adjustment costs linked to the number of hired and fired workers, plus a wage-dependent term (assuming wage-dependent hiring costs and wage discrimination against newcomers). The union faces marginally increasing costs in firings and marginally decreasing benefits from hirings. The two-part FE for the firm, the FE for the union, or both jointly considered differently affect employment and wages. Interestingly, standard adjustment costs increase hirings, even while the union reduces wages.

Suggested Citation

  • Cabo, Francisco & Martín-Román, Ángel L., 2017. "Dynamic collective bargaining. Frictional effects under open-shop industrial relations," MPRA Paper 77562, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:77562
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/77562/1/MPRA_paper_77562.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
    2. Bertola, Giuseppe & Rogerson, Richard, 1997. "Institutions and labor reallocation," European Economic Review, Elsevier, vol. 41(6), pages 1147-1171, June.
    3. Tapio Palokangas, 1997. "The Centralization of Wage Bargaining, Investment, and Technological Change," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 153(4), pages 657-657, December.
    4. Jaramillo, Fidel & Schiantarelli, Fabio & Sembenelli, Alessandro, 1993. "Are Adjustment Costs for Labor Asymmetric? An Econometric Test on Panel Data for Italy," The Review of Economics and Statistics, MIT Press, vol. 75(4), pages 640-648, November.
    5. Booth, Alison L., 2014. "Wage determination and imperfect competition," Labour Economics, Elsevier, vol. 30(C), pages 53-58.
    6. Samuel Bentolila & Giuseppe Bertola, 1990. "Firing Costs and Labour Demand: How Bad is Eurosclerosis?," Review of Economic Studies, Oxford University Press, vol. 57(3), pages 381-402.
    7. Daniel S. Hamermesh & Gerard A. Pfann, 1996. "Adjustment Costs in Factor Demand," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1264-1292, September.
    8. Modesto, Leonor & Thomas, Jonathan P., 2001. "An analysis of labour adjustment costs in unionized economies," Labour Economics, Elsevier, vol. 8(4), pages 475-501, September.
    9. Dittrich, Marcus & Schirwitz, Beate, 2011. "Union membership and employment dynamics: A note," Economics Letters, Elsevier, vol. 110(1), pages 38-40, January.
    10. Bentolila, S. & Saint-Paul, G., 1995. "A model of labour demand with linear adjustment costs," Labour Economics, Elsevier, vol. 2(1), pages 105-105, March.
    11. Dobbelaere, Sabien & Luttens, Roland Iwan, 2016. "Gradual collective wage bargaining," Labour Economics, Elsevier, vol. 40(C), pages 37-42.
    12. Kazanas, Thanassis & Miaouli, Natasha, 2014. "Wage-setting and capital in unionized markets: Evidence from South Europe," Economic Modelling, Elsevier, vol. 37(C), pages 368-376.
    13. Marco Guerrazzi, 2007. "Wage Bargaining in an Optimal Control Framework: A Dynamic Version of the Right-to-Manage Model," Open Discussion Papers in Economics 61, The Open University, Faculty of Social Sciences, Department of Economics.
    14. Gerard A. Pfann & Franz C. Palm, 1993. "Asymmetric Adjustment Costs in Non-linear Labour Demand Models for the Netherlands and U.K. Manufacturing Sectors," Review of Economic Studies, Oxford University Press, vol. 60(2), pages 397-412.
    15. Dias da Silva, António & Turrini, Alessandro, 2015. "Precarious and Less Well Paid? Wage Differences between Permanent and Fixed-term Contracts across the EU," IZA Policy Papers 105, Institute of Labor Economics (IZA).
    16. Goux, Dominique & Maurin, Eric & Pauchet, Marianne, 2001. "Fixed-term contracts and the dynamics of labour demand," European Economic Review, Elsevier, vol. 45(3), pages 533-552, March.
    17. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter.
    18. Chang, Juin-jen & Shaw, Ming-fu & Lai, Ching-chong, 2007. "A "Managerial" trade union and economic growth," European Economic Review, Elsevier, vol. 51(2), pages 365-384, February.
    19. Jones, Stephen R. G., 1987. "Union membership and employment dynamics," Economics Letters, Elsevier, vol. 25(2), pages 197-200.
    20. Abowd, John M. & Kramarz, Francis, 2003. "The costs of hiring and separations," Labour Economics, Elsevier, vol. 10(5), pages 499-530, October.
    21. António Dias da Silva & Alessandro Turrini, 2015. "Precarious and less well-paid? Wage differences between permanent and fixed-term contracts across the EU countries," European Economy - Economic Papers 2008 - 2015 544, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    22. Kidd, David P & Oswald, Andrew J, 1987. "A Dynamic Model of Trade Union Behaviour," Economica, London School of Economics and Political Science, vol. 54(215), pages 355-365, August.
    23. Tito Boeri & Jan van Ours, 2013. "The Economics of Imperfect Labor Markets: Second Edition," Economics Books, Princeton University Press, edition 1, number 10142.
    24. Chang, Juin-jen & Lai, Ching-chong, 1997. "Union membership and employment dynamics with endogenous union density," Economics Letters, Elsevier, vol. 57(1), pages 119-125, November.
    25. Dockner,Engelbert J. & Jorgensen,Steffen & Long,Ngo Van & Sorger,Gerhard, 2000. "Differential Games in Economics and Management Science," Cambridge Books, Cambridge University Press, number 9780521637329, October.
    26. Chang, Ching-Cheng & Stefanou, Spiro E., 1988. "Specification and estimation of asymmetric adjustment rates for quasi-fixed factors of production," Journal of Economic Dynamics and Control, Elsevier, vol. 12(1), pages 145-151, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Francisco Cabo & Angel Martín-Román, 2019. "Dynamic collective bargaining and labor adjustment costs," Journal of Economics, Springer, vol. 126(2), pages 103-133, March.
    2. Benoît Pierre FREYENS, 2010. "Measuring firing costs: The case for direct methods," International Labour Review, International Labour Organization, vol. 149(3), pages 287-313, September.
    3. Jung, Sven, 2013. "Employment Adjustment in German Firms," VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79696, Verein für Socialpolitik / German Economic Association.
    4. Sven Jung, 2014. "Employment adjustment in German firms [Betriebliche Beschäftigungsanpassung in Deutschland]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 47(1), pages 83-106, March.
    5. repec:eee:labchp:v:3:y:1999:i:pc:p:2985-3028 is not listed on IDEAS
    6. Jung, Sven, 2012. "Employment adjustment in German firms," Discussion Papers 80, Friedrich-Alexander University Erlangen-Nuremberg, Chair of Labour and Regional Economics.
    7. Kramarz, Francis & Michaud, Marie-Laure, 2010. "The shape of hiring and separation costs in France," Labour Economics, Elsevier, vol. 17(1), pages 27-37, January.
    8. Goux, Dominique & Maurin, Eric & Pauchet, Marianne, 2001. "Fixed-term contracts and the dynamics of labour demand," European Economic Review, Elsevier, vol. 45(3), pages 533-552, March.
    9. Alonso-Borrego, César & Fernández-Villaverde, Jesús & Galdon-Sanchez, Jose Enrique, 2004. "Evaluating Labor Market Reforms: A General Equilibrium Approach," IZA Discussion Papers 1129, Institute of Labor Economics (IZA).
    10. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," Review of Economic Studies, Oxford University Press, vol. 90(6), pages 2880-2942.
    11. Pedro M. Esperança, 2011. "Labor Adjustment Dynamics: An Application Of System Gmm," GEE Papers 0043, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Dec 2011.
    12. Feve, Patrick, 2002. "Solving labor demand models under asymmetric adjustment costs," Journal of Economic Dynamics and Control, Elsevier, vol. 26(5), pages 797-809, May.
    13. Diego Daruich & Sabrina Di Addario & Raffaele Saggio, 2023. "The Effects of Partial Employment Protection Reforms: Evidence from Italy," Review of Economic Studies, Oxford University Press, vol. 90(6), pages 2880-2942.
    14. Vermeulen, Philip, 2006. "Employment stickiness in small manufacturing firms," Working Paper Series 640, European Central Bank.
    15. Eugeniusz Kwiatkowski & Przemysław Włodarczyk, 2012. "Wpływ prawnej ochrony zatrudnienia na rynek pracy w warunkach negatywnego szoku ekonomicznego," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 11-12, pages 1-23.
    16. Leonor Modesto, 2008. "Unions, Firing Costs, and Unemployment," LABOUR, CEIS, vol. 22(3), pages 509-546, September.
    17. van der Wiel, Karen, 2010. "Better protected, better paid: Evidence on how employment protection affects wages," Labour Economics, Elsevier, vol. 17(1), pages 16-26, January.
    18. Lapatinas, Athanasios, 2009. "Labour adjustment costs: Estimation of a dynamic discrete choice model using panel data for Greek manufacturing firms," Labour Economics, Elsevier, vol. 16(5), pages 521-533, October.
    19. Eugeniusz Kwiatkowski & Przemysław Włodarczyk, 2017. "Employment Protection Legislation and Its Impact on the Elasticity of Employment in OECD Countries," Gospodarka Narodowa. The Polish Journal of Economics, Warsaw School of Economics, issue 3, pages 29-53.
    20. repec:pri:indrel:dsp011j92g746j is not listed on IDEAS
    21. Garibaldi, Pietro, 1998. "Job flow dynamics and firing restrictions," European Economic Review, Elsevier, vol. 42(2), pages 245-275, February.
    22. Øivind A. Nilsen & Arvid Raknerud & Marina Rybalka & Terje Skjerpen, 2005. "Lumpy Investments, Factor Adjustments and Productivity," Discussion Papers 441, Statistics Norway, Research Department.

    More about this item

    Keywords

    dynamic labor demand; collective wage bargaining; monopoly union model; adjustment costs; Stackelberg differential game;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:77562. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.