Unemployment and the "Labour-Management Conspiracy"

We study a model in which management and a union bargain sequentially, first choosing a rule that will later determine the level of employment, and then choosing a wage. The government then chooses an output or an employment subsidy. An exogenous natural turnover rate in the unionized sector creates unemployment whenever the union wage exceeds the competitive wage. Government intervention can increase both the equilibrium amount of unemployment and worsen the intersectoral allocation of labour, because of the induced change in the endogenous wage. Unemployment weakens but does not eliminate the possibility of a "labour-management conspiracy".


Issue Date:
1998
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/25040
Total Pages:
39
JEL Codes:
J58; J68
Series Statement:
CUDARE Working Paper 841




 Record created 2017-04-01, last modified 2017-08-24

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