The Effects of Union Wage-Settings on Firms’ Production Factor Decisions

Almas Heshmati () and Ilham Haouas ()

No 689, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This study is concerned with the development of a theoretical model and its empirical application to the estimation of the interaction between firms and trade union in determining wages and employment. The focus is on analyzing the effects of unions’ demands on the firm’s choice of factors of production. In a two-step process the union and firm determine wages and capital stock, conditional on which the firm decides on production factors of employment, working hours and capital operating time. We suggest the use of a panel data approach applied to manufacturing data. A dynamic model is specified in which the optimal levels of the variables of interest and the speed of their adjustments are modeled in terms of observable policy variables.

Keywords: manufacturing; wage bargaining; employment; capital stock; work hours; capital operating time; panel data (search for similar items in EconPapers)
JEL-codes: C33 D21 E24 J50 L60 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2003-01
New Economics Papers: this item is included in nep-afr, nep-lab and nep-pke
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Published - published in: Applied Economics Letters, 2004, 11 (7), 415-420

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Related works:
Journal Article: The effects of union wage-settings on firms' production factor decisions (2004)
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