Union wage setting in a dual labour market: the role of centralisation

Marcus Dittrich ()

International Economic Journal, 2008, vol. 22, issue 4, 461-470

Abstract: This paper analyses the centralisation of union wage bargaining when the workers' outside option is determined endogenously. A dual labour market model is developed where the wage rate in the first sector is either the result of decentralised bargaining at the firm level or of centralised bargaining at the sector level. Workers' outside option is employment in a competitive sector. Labour market outcome depends on whether the union takes into account the connection between wages in both sectors. Wage setting centralisation increases social welfare if union's bargaining power at the firm level is relatively high and/or the union at the sector level represents a relatively large number of workers.

Keywords: union wage bargaining; dual labour market; endogenous outside option; degree of centralisation (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1080/10168730802497536

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