Union Contracts and the Firm's Financial Structure
This paper examines the effects of union contracts on the firm’s capital structure. We consider one-stage and two-stage models, as well as wage and wage/employment contracts. We show that, for all Pareto efficient bargaining solutions, a higher debt reduces the expected tax bill, but increases the expected cost of labour contracts. This trade-off determines the optimal capital structure. We also show that a stronger union tends to increase the amount of equity used.
|Date of creation:||Jul 2002|
|Date of revision:|
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International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 399-412, May.
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- E. Appelbaum & E. Katz, 1987. "Asymmetric Taxation and the Theory of the Competitive Firm under Uncertainty," Canadian Journal of Economics, Canadian Economics Association, vol. 20(2), pages 357-69, May.
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