Social Preferences in Wage Bargaining: a Neocorporatist Approach
The starting point in this paper is based on the strand of the literature on corporatist systems stressing the role of co-operation and consensus in wage bargaining in order to reach better economic performances. In order to model a co-operative regime in the classical framework in which the monopoly union controls wages and the firm controls employment, we introduce social preferences with some degree of other-regarding concern(ORC) such that each agent's objective function is a linear combination of her own welfare and the other's. The results show that under specific conditions concerning the degree of ORC, one may obtain an employment level higher than in the selfish case and wage moderation.
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