A Union-Oligopoly Model of Endogenous Discrimination:Should it be wage discrimination taxed or discriminated employment subsidized?
Minas Vlassis () and
Nick Drydakis ()
No 614, Working Papers from University of Crete, Department of Economics
In the context of a homogenous good industry with Cournot rivalry and technological asymmetries among firms, equally skilled workers can be grouped according to their different reservation wages. Under decentralized firm-union bargaining, we show that unions may offer to firms the option to discriminate wages across such groups of employees and, by that, to achieve cost sub-additivity in the equilibrium. We subsequently propose that to combat the emerging wage discrimination a benevolent policy maker may activate either taxation, or subsidization, policy. Interestingly, while the former policy always entails a welfare loss, a welfare gain may emerge under the latter policy, relative to the no policy-wage discrimination status quo. Thus our findings suggest that the E.U- antidiscrimination directives may prove to be effective on both egalitarian and efficiency grounds.
Keywords: Unions; Oligopoly; Discriminatory Wage Contracts; Antidiscrimination Policy (search for similar items in EconPapers)
JEL-codes: J50 J51 J31 (search for similar items in EconPapers)
Pages: 26 pages
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Persistent link: https://EconPapers.repec.org/RePEc:crt:wpaper:0614
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