Union Power, Replacement and Labour Market Dynamics

Kai-Uwe Kuuhn and A. Jorge Padilla
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Kai-Uwe Kuuhn: University of Michigan and CEPR NERA, CEMFI and CEPR
A. Jorge Padilla: University of Michigan and CEPR NERA, CEMFI and CEPR

Economic Journal, 2002, vol. 112, issue 479, 317-343

Abstract: In this paper, we construct a new basis for insider--outsider theory that acknowledges that insiders are typically easier to organise, so that they can delegate their bargaining decisions to a representative if they want to. We show that harassment or discrimination of new workers by the insider work force is neither individually rational nor needed to explain union formation or inefficient hiring decisions. However, we show that there is a strong tendency for overemployment. Unions tend to increase the efficiency of hiring decisions although union contracts will look like inducing underemployment. Copyright 2002 Royal Economic Society

Date: 2002
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