Efficiency Wages and Local versus Central Bargaining

Asbjorn Rodseth

Oxford Economic Papers, 1993, vol. 45, issue 3, 470-81

Abstract: In a simple efficiency wage model, an employers' confederation always wants a lower wage than the individual employers. A centralized union normally wants a lower wage than local unions if the demand for labor in efficiency units is elastic, a higher wage if its is inelastic. Local unions that are willing to accept a reduction in the total wage bill to increase employment, want lower wages than their employers. In the long run, wages per efficiency unit of labor are independent of the bargaining system, while there is a trade-off between high employment and high hourly wages. Copyright 1993 by Royal Economic Society.

Date: 1993
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Working Paper: Efficiency Wages and Local Versus Central Bargaining (1991)
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