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The outcome of different bargaining models: the effects on wages, employment and the employment mix

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  • A. Cassoni
  • G. Labadie

Abstract

The paper analyses data on wages, employment and labour composition in the Uruguayan manufacturing sector during 1985-1999 in order to get some evidence on the effects of union action on these variables. The whole period is first studied using a model in which no assumptions on the underlying bargaining model are made. The results support the hypothesis of two different bargaining frameworks in the 80s and 90s. Therefore, a right-tomanage bargaining model is specified for the 80s and a recursive contracts model for the 90s. Union effects are such that while in the 80s the effect of trade unions were to increase wages and hence decrease employment, in the nineties they moderated wage demands in exchange of more job stability. They not only managed to have a positive direct effect on employment but also to buffer the negative effects of increased openness and demand fluctuations on employment. The existence of unions also had an impact on labour composition, favouring a higher share of non-production workers in total employment. The result can be linked to the fact that firms moved to more capital intensive – or at least more skilled labour intensivetechnologies to avoid union costs. A final finding is related to the fact that the change in the Uruguayan bargaining regime at the beginning of the 90s – by which the mandatory extension of contracts vanished – favoured a more decentralised negotiation scheme and thus ended with the homogenous impact found in the 80s, since coordination in bargaining was lost.

Suggested Citation

  • A. Cassoni & G. Labadie, 2001. "The outcome of different bargaining models: the effects on wages, employment and the employment mix," Documentos de Trabajo (working papers) 1401, Department of Economics - dECON.
  • Handle: RePEc:ude:wpaper:1401
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    File URL: http://decon.edu.uy/publica/2001/Doc1401.pdf
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    References listed on IDEAS

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    1. Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
    2. Adriana Cassoni & Zuleika Ferré, 1997. "Costos no salariales en el mercado de trabajo del Uruguay," Documentos de Trabajo (working papers) 0897, Department of Economics - dECON.
    3. John M. Abowd & Laurence Allain, 1996. "Compensation Structure and Product Market Competition," Annals of Economics and Statistics, GENES, issue 41-42, pages 207-217.
    4. Steven G Allen & Adriana Cassoni & Gastón J Labadie, 1996. "Wages and Employment After Reunionization in Uruguay," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(99), pages 277-294.
    5. 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.
    6. William M. Boal & John Pencavel, 1994. "The Effects of Labor Unions on Employment, Wages, and Days of Operation: Coal Mining in West Virginia," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 267-298.
    7. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
    8. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
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    Citations

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    Cited by:

    1. Carlos Casacuberta & Gabriela Fachola & Nestor Gandelman, 2004. "The impact of trade liberalization on employment, capital, and productivity dynamics: evidence from the uruguayan manufacturing sector," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(4), pages 225-248.
    2. A. Cassoni & G. Fachola & G. Labadie, 2001. "The impact of unions on the economic performance of firms," Documentos de Trabajo (working papers) 1501, Department of Economics - dECON.
    3. repec:dau:papers:123456789/5843 is not listed on IDEAS
    4. Adriana Cassoni & Gaston J. Labadie & Gabriela Fachola, 2002. "The Economic Effects of Unions in Latin America: Their Impact on Wages and the Economic Performance of Firms in Uruguay," Research Department Publications 3159, Inter-American Development Bank, Research Department.
    5. Mauricio Zunino, 2012. "Impactos de la reinstauración de los Consejos de Salarios sobre la distribución salarial en Uruguay," Económica, Departamento de Economía, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 129-167, January-D.

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