Should civil servants be restricted in wage bargaining? A mixed-duopoly approach

Junichiro Ishida and Noriaki Matsushima

No 2006-07, Discussion Papers from Kobe University, Graduate School of Business Administration

Abstract: Should civil servants (employees at public institutions) be allowed to bargain collectively? To answer this question, we construct a model of unionized mixed duopoly and examine the optimal regulatory framework of public institutions, especially focusing on a wage regulation imposed on the public firm. The wage regulation turns out to yield critical welfare implications as it gives rise to two opposing strategic effects: the wage regulation intensifies downstream-market competition while it loosens upstream-market competition. The overall welfare effect is ambiguous, depending crucially on the degree of product differentiation between the firms. We also show that, in contrast to the popular belief, granting the right to bargain collectively to civil servants would not necessarily help them because they tend to demand excessively high wages when they are allowed to bargain collectively. Finally, we briefly discuss a new perspective on the role of profit motives in public institutions when the wages are determined endogenously.

Keywords: Mixed oligopoly; Wage bargaining; Wage regulation; Labor unions; Strategic complements (search for similar items in EconPapers)
JEL-codes: H42 J31 J38 L13 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2006-03
References: Add references at CitEc
Citations: View citations in EconPapers (2)

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https://www.b.kobe-u.ac.jp/papers_files/2006_07.pdf First version, 2006 (application/pdf)

Related works:
Journal Article: Should civil servants be restricted in wage bargaining? A mixed-duopoly approach (2009)
Working Paper: Should civil servants be restricted in wage bargaining? A mixed-duopoly approach (2008)
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