Wage Bargaining, Employment, and Union Power: The Right-to-Manage Approach

Volker Böhm and Oliver Claas
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Volker Böhm: Center for Mathematical Economics, Bielefeld University
Oliver Claas: Center for Mathematical Economics, Bielefeld University

No 502, Center for Mathematical Economics Working Papers from Center for Mathematical Economics, Bielefeld University

Abstract: This paper analyzes the implications of right-to-manage wage bargaining between a producers' syndicate and a workers' union representing finite numbers of identical members in a monetary macroconomic model of the AS-AD type with government activity. At given prices and price expectations, nominal wages are set according to a Nash bargaining agreement. Producers then choose labor demand and commodity supply to maximize profits at given output prices. The commodity market clears in a competitive fashion. Unique temporary equilibria are shown to exist for each level of relative power of the union. These equilibria may exhibit under- or overemployment, depending on the level of union power. The paper presents a complete comparative-statics analysis of the temporary equilibrium, in particular of the role of union power on employment, wages, and income distribution, including a variety of different qualitative features compared to the situation under efficient bargaining. These differences arise primarily from a supply-side effect of union power under the right-to-manage approach as compared to a demand-side effect under efficient bargaining. In addition, the dynamic evolution under perfect foresight is monotonic with two co-existing balanced steady states, one of which is stable under certain conditions. These properties are qualitatively identical to those under efficient bargaining or under perfect competition.

Keywords: Collective Bargaining; Nash Bargaining; Union Power; Aggregate Supply-Aggregate Demand; Government Deficits; Perfect Foresight; Dynamics; Stability (search for similar items in EconPapers)
Pages: 35
Date: 2014-05-08
New Economics Papers: this item is included in nep-lab, nep-mac and nep-sog
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https://pub.uni-bielefeld.de/download/2675338/2901869 First Version, 2014 (application/x-download)

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Persistent link: https://EconPapers.repec.org/RePEc:bie:wpaper:502

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