Unions, efficiency wages, and unemployment

Rüdiger Wapler

No 210, Tübinger Diskussionsbeiträge from University of Tübingen, School of Business and Economics

Abstract: This paper develops a dynamic general equilibrium dual labour market model which incorporates both efficiency wages and union bargaining with monopolistically competitive firms. In one sector, a traditional sector produces a homogeneous good and firms face perfect competition on the product market. In the other sector, monopolistically competitive firms produce a horizontally differentiated good. In this sector, unions represent the interests of the workers and through bilateral bargaining with the employers, try to capture some of the rents which accrue here. Further, firms can increase their profits by paying the workers with the highest productivity an efficiency wage. Therefore, there is not only a wage differential between the two sectors, but also within the unionized sector. It is shown that not only the degree of union bargaining power but also the market power firms possess on the product market leads to an increase in unemployment.

Keywords: Arbeitsmarkt; Gewerkschaft; Tarifpartner (search for similar items in EconPapers)
JEL-codes: J41 J42 J51 (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuedps:210

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