Wage Centralization and the Scope of Firm–Union Bargaining: ‘Efficient Bargains’ or ‘Labour Demand’?

Minas Vlassis ()

Manchester School, 2003, vol. 71, issue 3, 308-329

Abstract: This paper focuses on the role that wage centralization may play regarding the endogenous determination of the scope of firm–union bargaining. Findings suggest that, as long as the alternative wage is sufficiently low, compliance with the centralized (minimum) wage deal is sustained by wage‐takers (small inefficient employers and their employees), and ‘labour demand’ proves to be an equilibrium bargaining arrangement for wage‐setters (large efficient employers and their workers’ union). Otherwise, and also if union power is low enough, ‘efficient bargains’ may be unanimously chosen by the latter agents, as a strategic device to counter losses arising from wage‐undercutting rivalry.

Date: 2003
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