Bargaining with a Shared Interest: The Impact of Employee Stock Ownership Plans on Labor Disputes

Peter Cramton, Hamid Mehran and Joseph Tracy

Papers of Peter Cramton from University of Maryland, Department of Economics - Peter Cramton

Abstract: Bargaining often occurs between parties with some shared interest. Partnerships, joint ventures, and cross ownership are examples. We extend standard bargaining models to allow for joint ownership. Joint ownership reduces costly bargaining disputes, as bargainers’ interests are more aligned. We then test the theory with collective bargaining data, where employee stock ownership plans (ESOPs) are the source of joint ownership. The theory predicts that ESOPs will lead to a reduction in strike incidence and the fraction of labor disputes that involve a strike. We examine these predictions using U.S. bargaining data from 1970-1995. The data suggest that ESOPs do increase the efficiency of labor negotiations by shifting the composition of disputes away from costly strikes. Consistent with improved bargaining efficiency, we find that the announcement of a union ESOP leads to a 50% larger stock market reaction as compared to the announcement of a nonunion ESOP.

Keywords: Bargaining; collective bargaining; ESOP; cross ownership; joint venture; strikes; dispute resolution; dispute costs (search for similar items in EconPapers)
JEL-codes: C78 D82 J52 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2010-06, Revised 2010-06
Note: Working Paper
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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