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Corruption, efficiency wage and union leadership

Sarbajit Chaudhuri () and Krishnendu Ghosh Dastidar

MPRA Paper from University Library of Munich, Germany

Abstract: This paper develops a model of determination of unionized wage in the presence of both collective bargaining and efficiency wage. The efficiency of each worker is positively related to both the wage and the unemployment rate in the economy. The unionized wage is greater than the efficiency wage. The firm finds it profitable to keep the unionized wage as close as possible to the efficiency wage. The union leader who is entrusted with the task of determining the unionized wage charges a bribe from the firm to keep the wage close to this level. The corrupt trade union leader and the management of the firm play a two-stage Nash bargaining game from where equilibrium unionized wage and the bribe are determined. The analysis leads to some interesting results which are important for anticorruption policy formulation.

Keywords: Corruption; Collective Bargaining; Efficiency Wage; Union; Firms (search for similar items in EconPapers)
JEL-codes: D22 D73 J5 J51 O17 (search for similar items in EconPapers)
Date: 2014-06-30
New Economics Papers: this item is included in nep-lab
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