[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/pri/indrel/558.html
   My bibliography  Save this paper

Is Collective Bargaining Pareto Efficient? A Survey of the Literature

Author

Listed:
  • Nicholas Lawson

    (Princeton University)

Abstract
It would be hard, even today, to deny that labor unions are important economic institutions, and it is this importance that makes their consequences for efficiency so substantial. Interest in the economic analysis of unions was revived in the early 1980s, in large part by a paper by Ian McDonald and Robert Solow which formalized, algebraically and graphically, ideas which were first expressed in the context of labor markets 35 years earlier by Wassily Leontief. The standard textbook model of the labour union treats the union as a conventional monopoly seller of labor, selecting the wage while the firm chooses the level of employment; McDonald & Solow, however, drew from Leontief's work to suggest an alternative in which the firm and union negotiate to a Pareto efficient contract. Further theoretical work followed, and a still-growing empirical literature began to develop, a significant portion of it dedicated to testing McDonald & Solow's model against the traditional labor demand curve theory. A wide variety of empirical procedures and tests have been attempted, with a diverse and contradictory range of findings; given the importance of the question of the efficiency of union contracts, an up-to-date survey of the literature may be useful in synthesizing past results and pointing the way to future research, and it is this role which the current paper will attempt to fill.

Suggested Citation

  • Nicholas Lawson, 2010. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Working Papers 1268, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:558
    as

    Download full text from publisher

    File URL: https://dataspace.princeton.edu/bitstream/88435/dsp01cc08hf62w/1/558.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Grossman, Gene M, 1983. "Union Wages, Temporary Layoffs, and Seniority," American Economic Review, American Economic Association, vol. 73(3), pages 277-290, June.
    2. Svejnar, Jan, 1986. "Bargaining Power, Fear of Disagreement, and Wage Settlements: Theory and Evidence from U.S. Industry," Econometrica, Econometric Society, vol. 54(5), pages 1055-1078, September.
    3. Peter Kuhn & Jacques Robert, 1989. "Seniority and Distribution in a Two-Worker Trade Union," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(3), pages 485-505.
    4. Vannetelbosch, Vincent J., 1996. "Testing between alternative wage-employment bargaining models using Belgian aggregate data," Labour Economics, Elsevier, vol. 3(1), pages 43-64, August.
    5. Andrea Gavosto, 1997. "The British Docks: A Test of Alternative Models of Wage and Employment Determination," LABOUR, CEIS, vol. 11(2), pages 225-248, June.
    6. Richard Layard & Stephen Nickell, 1990. "Is Unemployment Lower if Unions Bargain over Employment?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 773-787.
    7. Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
    8. Christofides, Louis N., 1990. "Non-nested tests of efficient bargain and labour demand models," Economics Letters, Elsevier, vol. 32(1), pages 91-96, January.
    9. Johnson, George E, 1990. "Work Rules, Featherbedding, and Pareto-optimal Union-Management Bargaining," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 237-259, January.
    10. Clark, Andrew, 1990. "Efficient Bargains and the McDonald-Solow Conjecture," Journal of Labor Economics, University of Chicago Press, vol. 8(4), pages 502-528, October.
    11. Brown, James N & Ashenfelter, Orley, 1986. "Testing the Efficiency of Employment Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 40-87, June.
    12. repec:bla:scandj:v:87:y:1985:i:2:p:197-225 is not listed on IDEAS
    13. repec:bla:scotjp:v:44:y:1997:i:2:p:134-52 is not listed on IDEAS
    14. Douglas H. Blair & David L. Crawford, 1984. "Labor Union Objectives and Collective Bargaining," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(3), pages 547-566.
    15. Currie, Janet, 1991. "Employment Determination in a Unionized Public-Sector Labor Market: The Case of Ontario's School Teachers," Journal of Labor Economics, University of Chicago Press, vol. 9(1), pages 45-66, January.
    16. repec:bla:scandj:v:87:y:1985:i:2:p:228-33 is not listed on IDEAS
    17. Kuhn, Peter, 1988. "A Nonuniform Pricing Model of Union Wages and Employment," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 473-508, June.
    18. Alogoskoufis, George & Manning, Alan, 1991. "Tests of alternative wage employment bargaining models with an application to the UK aggregate labour market," European Economic Review, Elsevier, vol. 35(1), pages 23-37, January.
    19. Kuhn, Peter & Sweetman, Arthur, 1999. "Vulnerable Seniors: Unions, Tenure, and Wages Following Permanent Job Loss," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 671-693, October.
    20. Heywood, John S, 1993. "Efficient Labour Bargains, Unemployment and Non-union Wages: A Two Sector Model," Australian Economic Papers, Wiley Blackwell, vol. 32(61), pages 214-230, December.
    21. Card, David, 1986. "Efficient Contracts with Costly Adjustment: Short-run Employment Determination for Airline Mechanics," American Economic Review, American Economic Association, vol. 76(5), pages 1045-1071, December.
    22. Carruth, Alan A & Oswald, Andrew J, 1985. "Miners' Wages in Post-war Britain: An Application of a Model of Trade Union Behaviour," Economic Journal, Royal Economic Society, vol. 95(380), pages 1003-1020, December.
    23. Hall, Robert E & Lilien, David M, 1979. "Efficient Wage Bargains under Uncertain Supply and Demand," American Economic Review, American Economic Association, vol. 69(5), pages 868-879, December.
    24. Manning, Alan, 1994. "How Robust Is the Microeconomic Theory of the Trade Union?," Journal of Labor Economics, University of Chicago Press, vol. 12(3), pages 430-459, July.
    25. Stephen Nickell & Sushil Wadhwani, 1991. "Employment Determination in British Industry: Investigations Using Micro-Data," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 58(5), pages 955-969.
    26. Andrews, Martyn & Harrison, Alan, 1998. "Testing for Efficient Contracts in Unionized Labour Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 50(3), pages 171-200, July.
    27. repec:bla:scandj:v:87:y:1985:i:2:p:226-27 is not listed on IDEAS
    28. Sara De la Rica & Marìa Paz Espinosa, 1997. "Testing Employment Determination in Unionised Economies as a Repeated Game," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(2), pages 134-152, May.
    29. repec:bla:econom:v:63:y:1996:i:252:p:673-86 is not listed on IDEAS
    30. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    31. Walter J. Wessels, 1991. "Do Unions Contract for Added Employment?," ILR Review, Cornell University, ILR School, vol. 45(1), pages 181-193, October.
    32. Abowd, John M, 1989. "The Effect of Wage Bargains on the Stock Market Value of the Firm," American Economic Review, American Economic Association, vol. 79(4), pages 774-800, September.
    33. Hirsch, Barry T. & Prasad, Kislaya, 1995. "Wage-employment determination and a union tax on capital: Can theory and evidence be reconciled?," Economics Letters, Elsevier, vol. 48(1), pages 61-71, April.
    34. John H. Pencavel, 1984. "The Tradeoff Between Wages and Employment in Trade Union Objectives," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 99(2), pages 215-231.
    35. Martinello, Felice, 1989. "Wage and Employment Determination in a Unionized Industry: The IWA and the British Columbia Wood Products Industry," Journal of Labor Economics, University of Chicago Press, vol. 7(3), pages 303-330, July.
    36. Dertouzos, James N & Pencavel, John H, 1981. "Wage and Employment Determination under Trade Unionism: The International Typographical Union," Journal of Political Economy, University of Chicago Press, vol. 89(6), pages 1162-1181, December.
    37. Farber, Henry S, 1978. "Individual Preferences and Union Wage Determination: The Case of the United Mine Workers," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 923-942, October.
    38. Frank, Jeff, 1985. "Trade Union Efficiency and Overemployment with Seniority Wage Scales," Economic Journal, Royal Economic Society, vol. 95(380), pages 1021-1034, December.
    39. MaCurdy, Thomas E & Pencavel, John H, 1986. "Testing between Competing Models of Wage and Employment Determination in Unionized Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 3-39, June.
    40. Jan K. Brueckner, 2001. "Prior Restrictions on Bargaining Contract Curves," Economics Bulletin, AccessEcon, vol. 10(1), pages 1-7.
    41. Maria Paz Espinosa & Changyong Rhee, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(3), pages 565-588.
    42. Ralitza Dimova, 2006. "Monopolistic wages or efficient contracts?: What determined the wage–employment bargain in post‐privatization Bulgaria?," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(2), pages 321-347, April.
    43. Carruth, Alan A & Oswald, Andrew J & Findlay, Lewis, 1986. "A Test of a Model of Trade Union Behaviour: The Coal and Steel Industries in Britain," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(1), pages 1-18, February.
    44. Bughin, J, 1993. "Union-Firm Efficient Bargaining and Test of Oligopolistic Conduct," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 563-567, August.
    45. Bean, Charles R & Turnbull, Peter J, 1988. "Employment in the British Coal Industry: A Test of the Labour Demand Model," Economic Journal, Royal Economic Society, vol. 98(393), pages 1092-1104, December.
    46. William Fellner, 1947. "Prices and Wages under Bilateral Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 61(4), pages 503-532.
    47. Peter Kuhn, 1998. "Innis Lecture: Unions and the Economy: What We Know; What We Should Know," Canadian Journal of Economics, Canadian Economics Association, vol. 31(5), pages 1033-1056, November.
    48. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
    49. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-595, September.
    50. Eberts, Randall W & Stone, Joe A, 1986. "On the Contract Curve: A Test of Alternative Models of Collective Bargaining," Journal of Labor Economics, University of Chicago Press, vol. 4(1), pages 66-81, January.
    51. Nickell, Stephen & Wadhwani, Sushil, 1988. "Unions, wages and employment : Tests based on U.K. firm-level data," European Economic Review, Elsevier, vol. 32(2-3), pages 727-733, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Charlie Blunden, 2022. "Between Market Failures and Justice Failures: Trade-Offs Between Efficiency and Equality in Business Ethics," Journal of Business Ethics, Springer, vol. 178(3), pages 647-660, July.
    2. David Marsden, 2015. "The future of the German industrial relations model [Die Zukunft des deutschen Modells der Arbeitsbeziehungen]," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 48(2), pages 169-187, August.
    3. Carsten Eckel & Hartmut Egger, 2017. "The Dilemma of Labor Unions: Local Objectives vs Global Bargaining," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 534-566, August.
    4. Neto, António & Furukawa, Yuichi & Ribeiro, Ana Paula, 2017. "Can Trade Unions Increase Social Welfare? An R&D Model with Cash-in-Advance Constraints," MPRA Paper 77312, University Library of Munich, Germany.
    5. Luciano Fanti, 2011. "When an efficient bargaining is more "efficient" than a competitive labour market," Discussion Papers 2011/131, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    6. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2020. "Wage Bargaining and Employment Revisited: Separability and Efficiency in Collective Bargaining," CESifo Working Paper Series 8422, CESifo.
    7. Afonso, Óscar, 2016. "Effects of labour-market institutions on employment, wages, R&D intensity and growth in 27 OECD countries: From theory to practice," Economic Modelling, Elsevier, vol. 53(C), pages 48-62.
    8. Claus-Jochen Haake & Thorsten Upmann & Papatya Duman, 2019. "The Decomposability of the Nash Bargaining Solution in Labor Markets," Working Papers CIE 128, Paderborn University, CIE Center for International Economics.
    9. Thorsten Upmann & Julia Müller, 2014. "The Structure of Firm-Specific Labour Unions," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 336-364, June.
    10. Julia Müller & Thorsten Upmann, 2013. "Centralised Labour Market Negotiations," CESifo Working Paper Series 4470, CESifo.
    11. Aleksandra Gregorič & Marc Steffen Rapp, 2019. "Board‐Level Employee Representation (BLER) and Firms’ Responses to Crisis," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 58(3), pages 376-422, July.
    12. Marco de Pinto & Jörg Lingens, 2019. "Unionization, information asymmetry and the de‐location of firms," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(4), pages 1782-1823, November.
    13. Fanti, Luciano & Buccella, Domenico, 2020. "Strategic Trade Policy with Asymmetric Bargaining Agenda," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 73(2), pages 257-274.
    14. Luciano Fanti, 2011. "When do firms prefer either monopolistic unions or an efficient bargaining?," Discussion Papers 2011/130, Dipartimento di Economia e Management (DEM), University of Pisa, Pisa, Italy.
    15. Elizabeth Schroeder & Victor J. Tremblay, 2014. "Union Bargaining in an Oligopoly Market with Cournot-Bertrand Competition: Welfare and Policy Implications," Economies, MDPI, vol. 2(2), pages 1-14, March.
    16. Claus‐Jochen Haake & Thorsten Upmann & Papatya Duman, 2023. "Wage bargaining and employment revisited: separability and efficiency in collective bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 125(2), pages 403-440, April.
    17. Kraft, Kornelius, 2018. "Productivity and distribution effects of codetermination in an efficient bargaining model," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 458-485.
    18. Laszlo Goerke & Nora Paulus, 2024. "Collective Bargaining about Corporate Social Responsibility," IAAEU Discussion Papers 202401, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:pri:indrel:dsp01cc08hf62w is not listed on IDEAS
    2. Louis N. Christofides & Andrew J. Oswald, 1991. "Efficient and Inefficient Employment Outcomes: A Study Based on Canadian Data," NBER Working Papers 3648, National Bureau of Economic Research, Inc.
    3. Hirsch, Barry T. & Prasad, Kislaya, 1995. "Wage-employment determination and a union tax on capital: Can theory and evidence be reconciled?," Economics Letters, Elsevier, vol. 48(1), pages 61-71, April.
    4. Adriana Cassoni, 1997. "A brief survey on the role of trade unions in labour market," Documentos de Trabajo (working papers) 0697, Department of Economics - dECON.
    5. Paul Heidhues, 2000. "Employers’ Associations, Industry-wide Unions, and Competition," CIG Working Papers FS IV 00-11, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    6. repec:eee:labchp:v:2:y:1986:i:c:p:1039-1089 is not listed on IDEAS
    7. Thorsten Upmann & Julia Müller, 2014. "The Structure of Firm-Specific Labour Unions," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 170(2), pages 336-364, June.
    8. António Brandão & Joana Pinho, 2018. "Productivity Shocks in a Union‐Duopoly Model," Manchester School, University of Manchester, vol. 86(6), pages 722-756, December.
    9. Andrews, Martyn & Harrison, Alan, 1998. "Testing for Efficient Contracts in Unionized Labour Markets," Bulletin of Economic Research, Wiley Blackwell, vol. 50(3), pages 171-200, July.
    10. Marie-Claire Villeval & Manfred Konigstein, 2005. "The Choice of the Agenda in Labor Negotiations: efficiency and behavioral considerations," Working Papers 0508, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    11. Marco Guerrazzi & Pier Giuseppe Giribone, 2021. "Dynamic wage bargaining and labour market fluctuations: the role of productivity shocks," SN Business & Economics, Springer, vol. 1(8), pages 1-20, August.
    12. Janet Currie Neelin, 1989. "What Do (Public Sector) Unions Do? Wage and Employment Determination Among Ontario Public School Teachers," UCLA Economics Working Papers 542, UCLA Department of Economics.
    13. Ester Faia & Lorenza Rossi, 2013. "Union Power, Collective Bargaining, And Optimal Monetary Policy," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 408-427, January.
    14. Jeffrey S. Zax, 1985. "Municipal Employment, Municipal Unions, and Demand for Municipal Services," NBER Working Papers 1728, National Bureau of Economic Research, Inc.
    15. Drydakis Nick, 2011. "Greek unions' preferences: measuring trends in the field. An exploratory note on the period 2008–2009," Transfer: European Review of Labour and Research, , vol. 17(4), pages 563-576, November.
    16. de la Croix, David & Palm, Franz C. & Pfann, Gerard A., 1996. "A dynamic contracting model for wages and employment in three European economies," European Economic Review, Elsevier, vol. 40(2), pages 429-448, February.
    17. Daniel S. Hosken & David N. Margolis, 1996. "The Efficiency of Collective Bargaining in Public Schools," CIRANO Working Papers 96s-10, CIRANO.
    18. Fuest, Clemens & Thum, Marcel, 2001. "Immigration and skill formation in unionised labour markets," European Journal of Political Economy, Elsevier, vol. 17(3), pages 557-573, September.
    19. Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
    20. William T. Dickens, 1995. "Do Labor Rents Justify Strategic Trade and Industrial Policy?," NBER Working Papers 5137, National Bureau of Economic Research, Inc.
    21. Peter J. Luke & Mark E. Schaffer, 1999. "Wage Determination in Russia: An Econometric Investigation," CERT Discussion Papers 9908, Centre for Economic Reform and Transformation, Heriot Watt University.
    22. Daniel S. Hamermesh, 1991. "Data Difficulties in Labor Economics," NBER Chapters, in: Fifty Years of Economic Measurement: The Jubilee of the Conference on Research in Income and Wealth, pages 273-298, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    labour unions; labor unions; monopoly seller; efficiency; wages;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:indrel:558. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/irprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.