Unions in a General Equilibrium Model of Firm Formation

Peter Kuhn

Journal of Labor Economics, 1988, vol. 6, issue 1, 62-82

Abstract: 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.

Date: 1988
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