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Wage Bargaining Under the National Labor Relations Act

Author

Listed:
  • Jesse A. Schwartz

    (Department of Economics, Vanderbilt University)

  • Quan Wen

    () (Department of Economics, Vanderbilt University)

Abstract

Sections 8(a)(3) and 8(a)(5) of the National Labor Relations Act prohibit a firm from unilaterally increasing the wage it pays the union during the negotiation of a new wage contract. To understand this regulation, we study a counterfactual model where the firm can unilaterally increase wages during contract negotiations. Comparing this model to the case where the firm must pay the wage from the expired contract, we show that the firm may strategically increase the union's temporary wage to upset the union's incentive to strike and to decrease the union's bargaining power. Consequently, increasing temporary wages may shrink the set of equilibrium contracts in the firm's favor. Indeed, as the union becomes more patient, the set of equilibrium wages converges to the expired wage, the best equilibrium outcome to the firm. We further demonstrate that our counterfactual model is valid since our results maintain even if the union is allowed to block the firm's temporary wage increase.

Suggested Citation

  • Jesse A. Schwartz & Quan Wen, 2004. "Wage Bargaining Under the National Labor Relations Act," Vanderbilt University Department of Economics Working Papers 0412, Vanderbilt University Department of Economics.
  • Handle: RePEc:van:wpaper:0412
    as

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    References listed on IDEAS

    as
    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
    3. Muthoo,Abhinay, 1999. "Bargaining Theory with Applications," Cambridge Books, Cambridge University Press, number 9780521576475.
    4. Card, David, 1990. "Strikes and Bargaining: A Survey of the Recent Empirical Literature," American Economic Review, American Economic Association, vol. 80(2), pages 410-415, May.
    5. Vroman, Susan B, 1989. "A Longitudinal Analysis of Strike Activity in U.S. Manufacturing: 1957-1984," American Economic Review, American Economic Association, vol. 79(4), pages 816-826, September.
    6. Bolt, Wilko, 1995. "Striking for a Bargain between Two Completely Informed Agents: Comment," American Economic Review, American Economic Association, vol. 85(5), pages 1344-1347, December.
    7. David Card, 1990. "Strikes and Wages: A Test of an Asymmetric Information Model," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 625-659.
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    9. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
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    11. Houba, Harold, 1997. "The policy bargaining model," Journal of Mathematical Economics, Elsevier, vol. 28(1), pages 1-27, August.
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    13. Gunderson, Morley & Kervin, John & Reid, Frank, 1986. "Logit Estimates of Strike Incidence from Canadian Contract Data," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 257-276, April.
    14. Haller, Hans & Holden, Steinar, 1990. "A letter to the editor on wage bargaining," Journal of Economic Theory, Elsevier, vol. 52(1), pages 232-236, October.
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    More about this item

    Keywords

    Collective Bargaining; National Labor Relations Act;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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