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Wages, Fringe Benefits and Efficiency in Union-Firm Bargaining

Author

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  • Elie Appelbaum

    () (York University, Canada)

Abstract

This paper provides an efficient union-firm bargaining solution within the right to manage framework, by separating efficiency and distribution considerations through bargaining over wage and fringe benefits. We show that without insurance considerations, efficiency is achieved by equating the wage and workers’ opportunity cost and providing the union with a surplus share in accordance with its bargaining power. We also show that with insurance considerations, the optimal contract, again, equates the wage and workers’ opportunity cost, but it also provides full insurance. There is empirical evidence that fringe benefits are, indeed, common and play an important role in union contracts.

Suggested Citation

  • Elie Appelbaum, 2008. "Wages, Fringe Benefits and Efficiency in Union-Firm Bargaining," Working Papers 2008_04, York University, Department of Economics.
  • Handle: RePEc:yca:wpaper:2008_04
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    File URL: http://dept.econ.yorku.ca/research/workingPapers/working_papers/2008/labour-bar.pdf
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    References listed on IDEAS

    as
    1. Booth, Alison L, 1995. "Layoffs with Payoffs: A Bargaining Model of Union Wage and Severance Pay Determination," Economica, London School of Economics and Political Science, vol. 62(248), pages 551-564, November.
    2. 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.
    3. Martin J. Osborne & Ariel Rubinstein, 2005. "Bargaining and Markets," Levine's Bibliography 666156000000000515, UCLA Department of Economics.
    4. Bean, Charles R, 1984. "Optimal Wage Bargains," Economica, London School of Economics and Political Science, vol. 51(202), pages 141-149, May.
    5. Simon P. Anderson & Michael Devereux, 1989. "Profit-Sharing and Optimal Labour Contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 425-433, May.
    6. Stephen Nickell & Sushil Wadhwani, 1991. "Employment Determination in British Industry: Investigations Using Micro-Data," Review of Economic Studies, Oxford University Press, vol. 58(5), pages 955-969.
    7. Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-545, November.
    8. Oswald, Andrew J & Turnbull, Peter J, 1985. "Pay and Employment Determination in Britain: What Are Labour," Oxford Review of Economic Policy, Oxford University Press, vol. 1(2), pages 80-97, Summer.
    9. Bughin, Jacques, 1996. "Trade Unions and Firms' Product Market Power," Journal of Industrial Economics, Wiley Blackwell, vol. 44(3), pages 289-307, September.
    10. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 3-39, June.
    11. Besancenot, Damien & Vranceanu, Radu, 1999. "A trade union model with endogenous militancy: interpreting the French case," Labour Economics, Elsevier, vol. 6(3), pages 355-373, September.
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    Cited by:

    1. Elie Appelbaum, 2009. "Alternating Offers Union-Firm Bargaining: Order of Play and Efficiency," Working Papers 2009_02, York University, Department of Economics.

    More about this item

    Keywords

    Price Union Contracts; Efficient Bargaining; Right to Manage;

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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