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Optimal Intervention in an Economy with Trade Unions

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  • Oswald, Andrew J

    (Department of Economics, University of Warwick)

Abstract

The paper studies the theory of optimal intervention in an economy with trade unions. It is shown that the traditional remedy, a flat employment subsidy in the union sector, cannot produce a first-best welfare optimum. But non-linear wage and employment subsidies can generate a full social optimum, and the paper examines their optimal structure. One appealing form turns out to be a wage subsidy schedule which is an increasing and concave function on union employment. Employment subsidy schedules and statutory wages policy are also discussed.

Suggested Citation

  • Oswald, Andrew J, 1982. "Optimal Intervention in an Economy with Trade Unions," The Warwick Economics Research Paper Series (TWERPS) 221, University of Warwick, Department of Economics.
  • Handle: RePEc:wrk:warwec:221
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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/1978-1988/twerp221.pdf
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    References listed on IDEAS

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    1. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    2. Mirrlees, J. A., 1976. "Optimal tax theory : A synthesis," Journal of Public Economics, Elsevier, vol. 6(4), pages 327-358, November.
    3. Layard, P R G & Nickell, S J, 1980. "The Case for Subsidising Extra Jobs," Economic Journal, Royal Economic Society, vol. 90(357), pages 51-73, March.
    4. Johnson, George E, 1980. "The Theory of Labour Market Intervention," Economica, London School of Economics and Political Science, vol. 47(187), pages 309-329, August.
    5. Jackman, R A & Layard, P R G, 1980. "The Efficiency Case for Long-Run Labour Market Policies," Economica, London School of Economics and Political Science, vol. 47(187), pages 331-349, August.
    6. Magee, Stephen P, 1973. "Factor Market Distortions, Production, and Trade: A Survey," Oxford Economic Papers, Oxford University Press, vol. 25(1), pages 1-43, March.
    7. Anand, Sudhir & Joshi, Vijay, 1979. "Domestic Distortions, Income Distribution and the Theory of Optimum Subsidy," Economic Journal, Royal Economic Society, vol. 89(354), pages 336-352, June.
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    Cited by:

    1. Kouretas, Georgios P. & Yannopoulos, Andreas, 2006. "Dynamic modelling of trade union behaviour: Evidence from the Greek manufacturing sector," Economic Modelling, Elsevier, vol. 23(2), pages 316-338, March.
    2. Cansino, JM & Cardenete, MA & González-Limón, JM & Román, R, 2013. "Economic impacts of biofuels deployment in Andalusia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 27(C), pages 274-282.
    3. Oswald, Andrew J, 1984. "Three Theorems on Inflation Taxes and Marginal Employment Subsidies," Economic Journal, Royal Economic Society, vol. 94(375), pages 599-611, September.
    4. Rupayan Pal, 2011. "Union-Firm Bargaining Under Alternative Pay Schemes: Does Performance Related Pay Fair Better?," Working Papers id:3803, eSocialSciences.

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