Unions in a General Equilibrium Model of Firm Formation
Peter Kuhn ()
Journal of Labor Economics, 1988, vol. 6, issue 1, 62-82
Unions are introduced into a general equilibrium model of firm formation. The author finds, under reasonable conditions, that la rge firms are more likely to be unionized, and that unionized firms a re more productive and "better managed" than nonunion firms of the same size. As well, unions reduce economic efficiency by distorting t he "occupation choice" decision between managing a firm and working in one. Perhaps surprisingly, this distortion persists even when ind ividual union contracts set both wages and employment in a fully effi cient manner but can disappear when the mechanism that allocates prop erty rights to union jobs is changed in certain ways. Copyright 1988 by University of Chicago Press.
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