Endogenous scope of firm-union bargaining with vertical pay comparisons

Michael Kopel, Emmanuel Petrakis and Anna Ressi

Journal of Economic Behavior & Organization, 2019, vol. 167, issue C, 39-52

Abstract: There is strong evidence that employees’ motivation and incentives in the workplace are affected by vertical pay comparisons. In a stylized Cournot duopoly model with firm–specific unions that institutionalize workers’ vertical fairness concerns, we show that universal wage employment (w,e)–bargaining may arise as the equilibrium scope of bargaining institution. We thus propose that intra–firm vertical fairness concerns may resolve the mismatch between recent findings in the empirical literature on labor market institutions and the predictions of traditional models that universal (w,e)–bargaining will never arise in equilibrium (the “Scope of Bargaining Puzzle”). We derive a number of testable hypotheses that address the recent shift towards more decentralized bargaining institutions, the decline in unions’ bargaining power, and the prevalence of (w,e)–bargaining.

Keywords: Scope of bargaining; Unionized oligopoly; Decentralized bargaining; Relative fairness concerns; Vertical pay comparison (search for similar items in EconPapers)
JEL-codes: J50 J53 L13 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268119302914
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:167:y:2019:i:c:p:39-52

DOI: 10.1016/j.jebo.2019.09.017

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().