Individual vs. Collective Bargaining in the Large Firm Search Model

Christian Bauer (christian.j.bauer@gmail.com) and Jörg Lingens

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: We analyze the welfare and employment effects of different wage bargaining regimes. Within the large firm search model, we show that collective bargaining affects employment via two channels. Collective bargaining exerts opposing effects on job creation and wage setting. Firms have a stronger incentive for strategic employment, while workers benefit from the threat of a strike. We find that the employment increase due to the strategic motive is dominated by the employment decrease due to the increase in workers' threat point. In aggregate equilibrium, employment is ineciently low under collective bargaining. But it is not always true that equilibrium wages exceed those under individual bargaining. If unemployment benefits are sufficiently low, collectively bargained wages are smaller. The theory sheds new light on policies concerned with strategic employment and the relation between replacement rates and the extent of collective wage bargaining.

Keywords: search; overemployment; collective wage bargaining; wage determination (search for similar items in EconPapers)
JEL-codes: J30 J41 J50 (search for similar items in EconPapers)
Date: 2010-01
New Economics Papers: this item is included in nep-bec, nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://epub.ub.uni-muenchen.de/11315/1/collective_wp_mucecon.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:11315

Access Statistics for this paper

More papers in Discussion Papers in Economics from University of Munich, Department of Economics Ludwigstr. 28, 80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Tamilla Benkelberg (tamilla.benkelberg@econ.lmu.de).