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The Legal Framework for Collective Bargaining in Developing Economies

  • John Pencavel

June 1996 This paper addresses the question, "How should the law treat labor unions and collective bargaining?" Because the answer to this question depends on what labor unions do, the first part of the paper describes the activities of unions and reviews the research designed to measure the consequences of unionism. The context of this review is a developing country which, by its very nature, cannot sustain as high a level of unionism as the more developed economies. This is partly because unions are agents of employees and, in less developed economies, a large fraction of workers are not employees but are self-employed and unpaid family workers. Developing countries have adopted different approaches to the design of the legal framework of collective bargaining. Some foster and nourish unionism while regimes in other countries actively suppress union activity. Few states adopt a neutral posture. Consequently, in most developing countries, unionism is highly politicized with many unions focusing their energies on political activities instead of representing the interests of their members at their place of work. In general, these political activities of unions have resulted in worse rather than better government economic policy. What is needed is a legal framework that encourages unions to concentrate their activities at the source of their members' welfare, namely, at the enterprise where workers are employed. A regulatory framework is sketched that proposes confining the collective bargaining activities of unions to the level of the enterprise. Once this is effected, the state should adopt a neutral and "hands-off" policy with respect to collective bargaining. Objections to this position are considered. In the public sector, final-offer arbitration is advocated to resolve disputes that would otherwise result in strikes.

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Paper provided by Stanford University, Department of Economics in its series Working Papers with number 97008.

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Date of creation: Jun 1996
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Handle: RePEc:wop:stanec:97008
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  1. Duncan, Greg J & Stafford, Frank P, 1980. "Do Union Members Receive Compensating Wage Differentials?," American Economic Review, American Economic Association, vol. 70(3), pages 355-71, June.
  2. Mazumdar, Dipak, 1993. "Labor Markets and Adjustment in Open Asian Economies: The Republic of Korea and Malaysia," World Bank Economic Review, World Bank Group, vol. 7(3), pages 349-80, September.
  3. Standing, Guy, 1992. "Do Unions Impede or Accelerate Structural Adjustment? Industrial versus Company Unions in an Industrialising Labour Market," Cambridge Journal of Economics, Oxford University Press, vol. 16(3), pages 327-54, September.
  4. Fields, Gary S. & Wan, Henry Jr., 1989. "Wage-setting institutions and economic growth," World Development, Elsevier, vol. 17(9), pages 1471-1483, September.
  5. Shalev, Michael, 1992. "Labour and the Political Economy in Israel," OUP Catalogue, Oxford University Press, number 9780198285137, March.
  6. Teal, Francis, 1996. "The Size and sources of economic rents in a developing country manufacturing labour market," Economic Journal, Royal Economic Society, vol. 106(437), pages 963-76, July.
  7. T. Paul Schultz, 1982. "Effective Protection and the Distribution of Personal Income by Sector in Colombia," NBER Chapters, in: Trade and Employment in Developing Countries, Volume 2: Factor Supply and Substitution, pages 83-148 National Bureau of Economic Research, Inc.
  8. Dornbusch, Rudiger & Edwards, Sebastian, 1989. "The macroeconomics of populism in Latin America," Policy Research Working Paper Series 316, The World Bank.
  9. Fields, Gary S, 1984. "Employment, Income Distribution and Economic Growth in Seven Small Open Economies," Economic Journal, Royal Economic Society, vol. 94(373), pages 74-83, March.
  10. Rosenzweig, Mark R., 1988. "Labor markets in low-income countries," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 15, pages 713-762 Elsevier.
  11. Moene, K.O. & Wallerstein, M. & Hoel, M., 1992. "Bargaining Structure and Economic Performance," Memorandum 10/1992, Oslo University, Department of Economics.
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