Unions in a frictional labor market

Per Krusell and Leena Rudanko

Journal of Monetary Economics, 2016, vol. 80, issue C, 35-50

Abstract: A labor market with search and matching frictions, where wage setting is controlled by a monopoly union that follows a norm of wage solidarity, is found vulnerable to substantial distortions associated with holdup. With full commitment to future wages, the union achieves efficient hiring in the long run, but hikes up wages in the short run to appropriate rents from firms. Without commitment, in a Markov-perfect equilibrium, hiring is too low both in the short and the long run. The quantitative impact is demonstrated in an extended model with partial union coverage and multiperiod union contracting.

Keywords: Labor unions; Frictional labor markets; Time inconsistency; Limited commitment; Long-term wage contracts (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (24)

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Related works:
Working Paper: Unions in a frictional labor market (2016)
Working Paper: Unions in a Frictional Labor Market (2015)
Working Paper: Unions in a frictional labor market (2015)
Working Paper: Unions in a Frictional Labor Market (2012)
Working Paper: Unions in a Frictional Labor Market (2012)
Working Paper: Unions in a Frictional Labor Market (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:80:y:2016:i:c:p:35-50

DOI: 10.1016/j.jmoneco.2016.04.006

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