Insider Bargaining Power, Starting Wages and Involuntary Unemployment

Nils Gottfries () and Tomas Sjostrom

Scandinavian Journal of Economics, 2000, vol. 102, issue 4, 669-688

Abstract: Recent studies of wage bargaining and unemployment have emphasized the distinction between insiders and outsiders, and that unions act in the interest of insiders. Yet it is typically assumed that insiders and recently hired outsiders are paid the same wage. We consider a model where the starting wage may differ from the insider wage, but incentive constraints associated with turnover affect the form of the contract. We examine under what conditions the starting wage is linked to the insider wage so that increased bargaining power of insiders raises the starting wage and reduces the hiring of outsiders. JEL classification: J23; J31; J33

Date: 2000
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https://doi.org/10.1111/1467-9442.00220

Related works:
Working Paper: Insider Bargaining Power, Starting Wages, and Involuntary Unemployment (1998)
Working Paper: Insider Bargaining Power, Starting Wages, and Involuntary Unemployment (1998)
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