Management Union Bargaining Under Minimum Wage Regulation in Less Developed Countries

Saikat Dutta and Prabal Roy Chowdhury ()
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Saikat Dutta: London Business School

Indian Economic Review, 1998, vol. 33, issue 2, 169-184

Abstract: We examine the impact of changes in minimum wages regulation on unionized workers. The bargaining process between the management and the union is modeled as an alternating-offers bargaining game over employment and wage. We find that the equilibrium wage is equal to the minimum wages and that an increase in minimum wages decreases the income of the employer, as well as the level of employment and hence of output. Moreover if the marginal product of labour is inelastic, then the income of the union declines as well. Thus our results seriously question the validity of indiscriminate increases in minimum wages.

JEL-codes: C78 J23 J30 J51 (search for similar items in EconPapers)
Date: 1998
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