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Employment, hours and the welfare effects of intra-firm bargaining

Maarten Dossche (), Vivien Lewis () and Céline Poilly

Journal of Monetary Economics, 2019, vol. 104, issue C, 67-84

Abstract: Bilateral bargaining between a multiple-worker firm and individual employees leads to overhiring. With a concave production function, the firm can reduce the marginal product by hiring an additional worker, thereby reducing the bargaining wage paid to all existing employees. We show that this externality is amplified when firms can adjust hours per worker as well as employment. Firms keep down workers’ wage demands by reducing the number of hours per worker and the resulting labor disutility. Our finding is particularly relevant for European economies where hours adjustment plays an important role.

Keywords: Employment; Hours; Intrafirm bargaining; Overhiring (search for similar items in EconPapers)
JEL-codes: D62 E24 E61 E64 H21 (search for similar items in EconPapers)
Date: 2019
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Related works:
Working Paper: Employment, hours and the welfare effects of intra-firm bargaining (2019) Downloads
Working Paper: Employment, Hours and the Welfare Effects of Intra-Firm Bargaining (2016) Downloads
Working Paper: Employment, Hours and the Welfare Effects of Intra-Firm Bargaining (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:104:y:2019:i:c:p:67-84

DOI: 10.1016/j.jmoneco.2018.09.002

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