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The empirical literature addressing links between the labor and the marriage markets is numerous and varied. Despite this, the theoretical (equilibrium) literature that explicitly links the two markets is less developed, particularly so with frictional markets. We build an equilibrium search model where married couples make joint decisions on home production and labor market participation. We then analyze the implications of our results for a frictional marriage market allowing us to consider the interaction between both markets. A worker´s bargaining position reflects their own productivity, and also the employment status and conditions of their spouse. We find that couples with very different productivities have different strategies regarding labor market participation. In symmetric couples, the partners behave symmetrically. Workers get better job offers when their spouses are employed, and in some equilibria a person may search for transitory jobs with the sole purpose of raising the long-term wages of their spouse. In some cases, firms unilaterally increase a worker’s wage in order to reduce turnover, by ensuring that the spouse stays at home. Whether firms follow that strategy or not may be a matter of multiple equilibria, depending on parameter values. All this provides an additional explanation for wage and search behavior heterogeneity of similar workers and/or couples.

Trade unions distort a profit-maximising firm's input choice. The nature of the resulting inefficiency depends on whether there are wage negotiations or there is efficient bargaining. Moreover, trade unions redistribute income and thereby affect welfare. If firms also pursue Corporate Social Responsibility (CSR) objectives, input choices may be distorted already in the absence of collective bargaining. Adopting a positive perspective, we show that CSR objectives, which induce a firm to expand production, have ambiguous wage and employment consequences in case of wage negotiations and raise employment if there is efficient bargaining. Importantly from a normative vantage point, such CSR objectives make a welfare-enhancing role of trade unions more likely in the presence of wage negotiations. The reverse is true in case of efficient bargaining.

We propose a new V AR identication scheme that enables us to disentangle labor supply shocks from wage bargaining shocks. Identication is achieved by imposing robust sign- restrictions that are derived from a New Keynesian model with endogenous labor force par- ticipation. According to our analysis on US data over the period 1985-2014, labor supply shocks and wage bargaining shocks are important drivers of output and unemployment both in the short run and in the long run. These results suggest that identication strategies used in estimated New Keynesian models to disentangle labor market shocks may be misguided. We also analyze the behavior of the labor force participation rate through the lenses of our model. Wend that labor supply shocks are the main drivers of the participation rate and account for about half of its decline in the aftermath of the Great Recession.

The Mortensen and Pissarides (1994) matching model with all wages negotiated each period is shown inconsistent with macroeconomic wage dynamics in the US. This applies even when heterogeneous match productivities, time to build vacancies and credible bargaining are incorporated. Wage rigidity consistent with micro evidence that wages of job changers are more flexible than those of job stayers allows the model to capture these dynamics and is not inconsistent with parameter calibrations in the literature. Such wage rigidity affects only the timing of wage payments over the duration of matches, so conclusions about characteristics based on calibrations continue to apply.

During the three decades spanning the early 1950s to the early 1980s, the wage-setting process in most Northern European countries was dominated by centralized bargaining (i.e., peak-level labor and employer associations set wages nationwide). In the early 1980s, centralized wage bargaining began to collapse. In this paper, we assess a novel explanation for both the initial establishment of a centralized wage-setting process, and its subsequent collapse. According to our theory, centralized wage bargaining was set up as a response to the spillovers created by the unemployment benefit program. Its collapse was the result of the increase in the productivity gap across workers, brought about by equipment-specific technological progress and equipment–skill complementarity.

We consider a model of wage determination with private information in a duopoly. We investigate the effects of unions having relative concerns on the negotiated wage and the strike activity. We show that an increase of unions' relative concerns has an ambiguous effect on the strike activity.

In einem Modell mit Lohnverhandlungen und unvollstandiger Beobachtbarkeit individueller Arbeitsanstrengungen zeigen wir, dass sich die verschiedenen Motive bei der Lohnfindung – Verteilung von Renten zwischen Arbeitgeber und Arbeitnehmern, Effizienzlohnerwagungen – sich in ihren Wirkungen gegenseitig verstarken. Fur die Auswirkungen der Steuerpolitik auf die Beschaftigung bedeutet dies, dass eine progressivere Ausgestaltung des Steuersystems grundsatzlich zu mehr Lohnmoderation fuhrt. Da eine hohere Steuerprogression jedoch zugleich die individuellen Anstrengungsanreize verringert, ist der Beschaftigungseffekt einer Steuerreform, die die Progression erhoht, a priori nicht eindeutig. Das aus der Lohnverhandlungsliteratur bekannte Ergebnis, dass Steuerprogression gut fur die Beschaftigung sei, lasst sich somit in einem allgemeineren Modellrahmen nicht bestatigen. Zwar ist die Beschaftigung bei einem moderat progressiven Steuersystem generell hoher als bei einem proportionalen Steuersystem, doch lassen sich negative Beschaftigungseffekte bei einer weiteren Erhohung der Steuerprogression nicht ausschliesen.

We present an ultimatum wage bargaining experiment showing that a trade union facilitating non-binding communication among workers, raises wages by simultaneously increasing employers’ posted offers and toughening the bargaining position of employees, without reducing overall market efficiency.

This article offers the first systematic study of the institutional and political conditions under which collective agreements finance and organize continuing vocational training (CVT). Combining Mill's methods of agreement and difference with pattern matching, it identifies proactive small and medium enterprises, proactive public policies, proactive trade unions, and links between CVT and wage bargaining as probable conditions for CVT by collective labour agreement. The most important finding is that the research on the development of political–economic institutions in coordinated market economies has to analyse more carefully how state activities and the behaviour of small and medium‐sized firms affect the coordination of economic activities in skills formation.

In this paper we analyze empirically how labor market institutions influence business cycle volatility in a sample of 20 OECD countries. Our results suggest that countries characterized by high union density tend to experience more volatile movements in output, whereas the degree of coordination of the wage bargaining system and the strictness of employment protection legislation appear to be only of limited importance. We also find some evidence suggesting that highly coordinated wage bargaining systems have a dampening impact on inflation volatility.

The current locus of promoting equal pay in Finland is the workplace. Legal instruments, like gender equality planning and its pay surveys, are to be implemented in workplaces. This development raises important questions about the central role of the local trade union representatives as promoters of equal pay. This article analyses how local trade union representatives construct the problem of unequal pay and their role in narrowing the gender pay gap and their possible agonistic adversaries in negotiations on equal pay. Different problem representations concerning equal pay are analysed and evaluated on the basis of their potential to fracture the gender-blind wage bargaining culture and ability to cash in on the promises made towards narrowing the gender pay gap.

The Nordic countries serve as models for successful employment and labour market policies. In this article, Nordic employment and labour market policies are analyzed from a comparative point of view. It is argued that Nordic employment and labour market policies have lost some of their distinctive features. Active labour market policies, for example, are now at the centre of policy priorities in many countries of the EU. And in some other respects, the Nordic countries have converged towards political patterns characteristic for states in central Europe, for example, de-centralized patterns of wage bargaining and the partial lack of corporatist concertation. During the current financial crisis, specific patterns of crisis management can be observed in Scandinavia that make these countries distinct from many other countries in Europe.

Using data on 20 industrial countries over the period 1982 to 2003, this article finds central bank independence to favorably affect both unemployment and employment rates. The size of these effects appears to be substantial, particularly in the long term. In contrast to some of the previous literature, the article finds that the favorable effects of central bank independence do not depend on the degree of wage bargaining centralization or coordination. Furthermore, it finds that higher centralization as well as higher coordination of wage bargaining may also have favorable direct effects on labor market performance.

We analyze the transmission mechanism of wages to inflation within a New Keynesian business cycle model with wage rigidities and labor market frictions. Our main focus is on the channel of real wage rigidities on inflation persistence for which we find the specification of the wage bargaining process to be of crucial importance. Under the standard efficient Nash bargaining, the feedback of wage rigidities on inflation is ambiguous and depends on other labor market variables. However, under the alternative right-to-manage bargaining we find that more rigid wages translate directly into more persistent movements of aggregate inflation.

Economides (Economics Letters, 1986, 21, pp. 67–71) has shown that within a linear city an equilibrium exists in a two-stage location–price game when the curvature of the transportation cost function is sufficiently high. One important point is that not all of these equilibria are at maximal differentiation. In this paper, we include an additional stage with decentralized wage bargaining. This intensifies price competition resulting in locations that are nearer to the extremes of the city. The magnitude of this effect depends on the bargaining power of the unions. Contrary to the model with exogenously given costs, if unions are sufficient strong all price equilibria in pure strategies are at maximal differentiation. With a low parameter for the curvature of the transportation cost function unions can improve the location decision from a social viewpoint.

This paper uses a linked employer-employee dataset to analyze the impact of institutional wage bargaining regimes on average labor costs and within-firm wage dispersion in private sector companies in Ireland. The results show that while centralized bargaining reduced labor costs within both the indigenous and foreign-owned sectors, the relative advantage was greater among foreign-owned firms. The analysis suggests that there are potentially large competitiveness gains to multinational companies that locate in countries implementing a centralized bargaining system. Furthermore, the results provide additional support to the view that collective bargaining reduces within-firm wage inequality.

The bargaining relationship between a firm and its incumbent worker who possesses firm-specific human capital is examined. It is shown that the worker's ability to withhold his/her skills strategically increases his/her bargaining power. Multiple efficient as well as inefficient equilibria involving delays in negotiation are characterized. When the firm has outside options, the range of both efficient and inefficient equilibria shrinks; moreover, delays are shortened in inefficient equilibria. The model predicts that wages are procyclical.

The paper analyses the welfare effects of union bargaining (de)centralization in a dual labour market with a unionized and a competitive sector. We show that social welfare depends on both the structure of the union's objective function and the elasticities of labour demand in both sectors. The welfare-maximizing employment allocation can be obtained under a high degree of centralization if the union maximizes the total wage-bill. Otherwise, if the union is rent maximizing, welfare is higher under local bargaining. However, in that case neither central nor local wage setting yields the social optimum.

This paper extends an otherwise standard New Keynesian (NK) model to allow for the presence of large wage setters. Building on monetary models from an earlier generation, I contribute to the NK literature by adding some new insight. It is shown that once the presence of large wage setters is taken into account, the degree of wage setting centralization and the aggressiveness of the central bank in stabilizing inflation jointly affect steady state employment. Because of this interaction, the benefits associated with inflation stabilization increase in the centralization of the wage bargaining process.

This paper analyses how the structure of wage bargaining affects R&D investment by firms that increases the productivity of labour in a Cournot duopoly. We find that total expenditure on R&D is greater when wages are set simultaneously than when they are set sequentially. Thus sequential wage negotiations reduce the incentive for firms to innovate and affect the productivity of labour. When wage negotiations are sequential the productivity of labour is greater (lower) in the follower (leader) firm than when negotiations are simultaneous. We also obtain that for same parameter values it is possible for the firm with the lower productivity to end up paying a higher wage than the firm with the higher level of labour productivity.

An equation for earnings is derived from the assumption that wage increases are determined in a process of negotiation bet ween union and firm. The union is taken to be concerned about real wa ge, the firm about its real profit. The goods market is perfectly com petitive. The empirical work supported the hypothesis. The data sugge sted that employees' concerns have more influence on the outcome than employers'. The levels of profits and the real wage both played a ro le in explaining wage increases. The change in unemployment was found relevant to the outcome as well as the level. Copyright 1987 by Blackwell Publishing Ltd

In his widely reprinted paper “On the Folly of Rewarding A, While Hoping for B,” Kerr argued that vividness was one of the major reasons for distorted rewards. Using both archival and survey data, the present paper directly tests Kerr's proposal by investigating whether, how, and why highly visible behaviors are over-rewarded and less visible, but similarly (or more) important behaviors are under-rewarded. The National Basketball Association (NBA) was chosen as the domain of this study because scoring is particularly vivid, even though both non-scoring and scoring performances are critical for winning games. Findings from four studies demonstrated that the scoring performance of NBA players was weighed more heavily than their non-scoring performance. Scorers were rewarded with higher salaries and received more support in the NBA All-Star balloting than defenders, even though they might not necessarily make more contribution than their teammates. This pattern of findings suggests that the vividness effect may lead to pronounced differences in people's judgments, especially when they face abundant real-world information with similar validity. Copyright © 2008 John Wiley & Sons, Ltd.

Conventional wisdom is that a high trade union bargaining strength and a system of coordinated wage bargaining reduce the attractiveness of an economy as a location for foreign direct investment, although there is limited evidence for this. The paper takes panel data for 19 OECD economies to examine the relationship between trade union bargaining strength, bargaining coordi nation, and a range of incentives for inward foreign direct investment. It finds a strong negative effect of trade union density on inward foreign direct investment, which is dependent on the degree of wage bargaining coordination. A high degree of coordination weakens the deterrent effect of high union density, which is consistent with the notion that under certain circumstances a coordinated increase in wages can increase profits of the multinationals by hurting domestic firms.

To examine the effects on labor market performance of government tax and enforcement policies, this paper develops an equilibrium model featuring tax evasion, matching frictions, and worker-firm wage bargains. In the wage bargains, workers and firms can agree on the amount of remuneration that should not be reported to the tax authorities. We find that increased taxation actually reduces unemployment, whereas more zealous enforcement has the opposite effect.

According to the standard union bargaining model, unemployment benefits should have big effects on wages, but product-market prices and productivity should play no role in the wage bargain. We formulate an alternative strategic bargaining model, where labour and product-market conditions together determine wages. A wage equation is derived and estimated on aggregate data for four Nordic countries. Wages are found to depend not only on unemployment and the replacement ratio, but also on productivity, international prices and exchange rates. There is evidence of considerable nominal wage rigidity. Exchange rate changes have large and persistent effects on competitiveness.

**: The most important economic motive for privatization and liberalization is to reduce costs, which are believed to be higher in a public monopoly for several reasons, including internal rent capture. We assume that there is wage-bargaining both before and after privatization and liberalization. Wages are then in most cases reduced by liberalization but not by privatization as such. Social welfare may increase after liberalization with decentralized wage-bargaining if many firms enter, if the employees' bargaining strength is high and if there is no need of vertical separation. However, the social costs of privatization and liberalization are more likely to dominate despite free entry if sunk costs are high, and will always dominate under central wage-bargaining or vertical separation.

Global trade expansion after 1870 had potentially powerful effects on income distribution, especially in land-abundant less industrialised economies, by increasing land prices relative to wages. The papers in this issue add evidence on wage–rentals for a range of countries, specifically Australia, Canada, Ghana, India, and Sweden. These new data offer partial support for Jeffrey Williamson’s view that the distributional effects of booming global trade to 1914 were powerful and ubiquitous, but they highlight that more attention might be given to geographical boundaries and to other distribution forces including technology and wage bargaining conditions.

The main objective of this paper is to analyse the major transformations of the Swedish model. We argue that the current Swedish model appears today more in line with the three core components of the original Swedish model developed during the 1950s. In our view, the period 1975-1991 represents a clear deviation from the original Swedish model, a departure that culminated in the most severe crisis than Sweden has experienced since the 1930s. After this period of turbulence, the Swedish economy has undergone a particularly favourable development. Unemployment has been cut by half, inflation has been curbed and the country appears to have recovered from the deep economic crisis of the early 1990s. The changes in economic policy towards a more restrictive and anti-inflationary macro-economic policy, the reorientation of active labour market policies towards supply oriented measures and the structural reforms undertaken in the tax and social protection systems during the 1990s suggest a revival and renaissance of the traditional Swedish model. The modifications in Swedish industrial relations, in particular the clear tendency to a re-coordination of collective bargaining have also played a vital role in the Swedish recovery. These new developments appear to respond to a three-pronged objective: ensuring industrial peace; limiting the impact of transaction costs associated with the absence of coordination mechanisms and the negative externalities on employment and firm competitiveness of uncontrolled wage drift; and finally guaranteeing a principle of subsidiarity making it possible to adapt the provisions contained in industry-wide collective agreements to the productive and competitive constraints of Swedish companies. The various reforms of the social protection system undertaken during the 1990s have essentially taken the form of a temporary reduction of income replacement rates and, with the notable exception of the restructuring of the tax and pension system, have left the Swedish welfare state system almost intact. The Swedish welfare state remains, by international standards, still clearly universal and inclusive in nature and still enjoys a high level of across the board political and public support. The reshaping of the pension and the tax systems aiming at strengthening work incentives are also clearly in line with the general philosophy of the original Swedish model favouring integrative transitions instead of passive support and social exclusion. The recent modifications of the Swedish model constitute an interesting advance, creating an institutional framework favourable to the emergence of negotiated flexibility and a return towards a more balanced economic and employment growth. In our view, these developments reinforce the coherence of the Swedish Model and the robustness of its social cohesion.

The original article with Lars Calmfors predicted that highly coordinated or centralized bargaining would lead to wage restraint and low unemployment. Despite shortcomings, this prediction has survived scrutiny. Recent work suggests that collective bargaining should be seen as part of broader research on institutions and macroeconomic performance in growth.

Wage inequality is a subject of intense political and substantive concern, and differencesin the extent of wage inequality between the Anglo-American economies and those of con-tinental Europe animate public and scholarly discussion. The wide earnings differentialsobserved in the United States and the United Kingdom are commonly justified as the properand necessary incentives for a mature, growth-oriented economy; the narrower income dif-ferentials encountered in continental Europe are rationalized as necessary for the protectionof the less-well paid and the integrity of the social fabric. The upward secular trend in wageinequality in the US since the 1970s, which is a stark reversal of the pattern observed duringthe preceding 40 years, is also a topic attracting wide public and scholarly attention.Despite the importance of the subject and the amount of attention that it has received,the extensive literature on the economic impact of wage bargaining institutions in advanceddemocratic societies contains only a few widely accepted findings. One of these is that morecentralized bargaining institutions strongly encourage wage equality. No less an authoritativeorgan than the OECD notes, for instance, that “there is a fairly robust relation betweencross-country differences in earnings inequality and bargaining structures” (OECD 1997,p. 64). Several well-designed country-specific studies support the claim that the system ofcollective bargaining is a major determinant of variations in the extent of wage inequality(Hibbs and Locking, 1996, 2000, Erickson and Ichino, 1995). Yet even the most careful andwell executed country level results may be affected by idiosyncratic country-specific factors.Evidence at the cross-national level is required. The most careful and convincing cross-national empirical documentation of the link between centralized bargaining institutionsand wage inequality appears in Wallerstein (1999), published in this journal

SOUTH AFRICA'S PERFORMANCE has been dismal in dealing with the rising unemployment that the economy has been faced with since the 1970s. The purpose of this paper is to develop a labour model of the South African economy, which will be used in follow-up research to investigate the structural nature of the problem and to consider the question of whether the phenomenon of jobless growth is true for South Africa. In this paper, a neoclassical labour market model of the South African economy is developed, distinguishing between a skilled and an unskilled labour market. The modelling of wages and employment is based on the systems approach followed by Layard and Nickell (1985, 1986) and Nickell (1988). They use a framework of wage bargaining under imperfect competition and, as a result, include the role of labour unions and labour taxes on employers. The estimated labour model will be incorporated into a fullyfledged neoclassical supply-side model and linked to the macroeconometric model of the University of Pretoria in order to investigate empirically whether unemployment is mainly structural in nature. The analysis, although outside the scope of this paper, will entail both demand and supply-side policy scenarios in an attempt to evaluate the relative efficiency of various policy strategies in solving the problem.

The area-wide wage agreement is at the centre of Germany's system of collective bargaining. In recent years, however, there has been a tendency towards the decentralization of collective bargaining. Individual wage agreements have led to more moderate wage developments, whilst collective agreements with individual firms, and agreements at the production unit level, have not had this moderating effect. On the other hand, collective bargaining has become more flexible, leading to greater pay differentiation. The further decentralization of collective bargaining, although desirable, has given rise to objections based in constitutional law and to resistance from employees and employers.

A model of labor-constrained accumulation and economically directed technical progress has a stable steady state at which the class distribution of income is invariant with respect to population and saving parameters yet sensitive to workers’ stances in wage bargaining and to the tax and transfer policies of a redistributive state.

We develop a model of wage determination with private information, in which the union has the option to delegate the wage bargaining to either surplus-maximizing delegates or to wage-maximizing delegates (such as senior union members). We show that the wage outcome in case of surplus-maximizing delegates is not necessarily smaller than the wage outcome in case of wage-maximizing delegates, even when the wage bargaining with private information is close to one with complete information. However, if it is commonly known that the union is stronger than the firm and the demand is sufficiently elastic, then delegating to wage-maximizing delegates definitely increases the wage at equilibrium. The maximum delay in reaching an agreement is greater whenever the union chooses wage-maximizing delegates instead of surplus-maximizing delegates and remains finite even when the period length shrinks to zero.

Despite the apparent stability of the wage bargaining institutions in West Germany, aggregate union membership has been declining dramatically since the early 90's. However, aggregate gross membership numbers do not distinguish by employment status and it is impossible to disaggregate these sufficiently. This paper uses four waves of the German Socioeconomic Panel in 1985, 1989, 1993, and 1998 to perform a panel analysis of net union membership among employees. We estimate a correlated random effects probit model suggested in Chamberlain (1984) to take proper account of individual specfic effects. Our results suggest that at the individual level the propensity to be a union member has not changed considerably over time. Thus, the aggregate decline in membership is due to composition effects. We also use the estimates to predict net union density at the industry level based on the IAB employment subsample for the time period 1985 to 1997.

This paper compares union wage bargaining outcomes across different types of employers. Five different employer objectives are discussed; profit–, welfare– and output maximization, and two specifications of a Leviathan. The model shows that the ordering of the union wage level across employer types depends on the functional form of product demand. With constant elasticity of product demand, the wage tends to be lowest in the output maximization case, while with a linear product demand, the wage tends to be lowest under welfare maximization.

Japan has received conflicting assessments in the comparative political economy literature. This article seeks to identify the location of Japan's political economy within a comparative framework, building on recent analyses of macroeconomic policy and wage coordination. The author examines empirical records and shows that Japan's regime is best considered ‘Keynesian centralization’, rather than ‘monetarist (semi)decentralization’, in light of its effective wage coordination and its anti-inflationary but flexibly accommodating macroeconomic policy. When there was national consensus on macroeconomic conservatism, Japan implemented restrictive policy and resembled monetarist centralization. However, Japan's monetarist centralization did not lead to distributional conflicts and high unemployment because its decentralized but coordinated wage bargaining and weak labor made it possible for employers and unions to achieve national diffusion of wage restraint without facing solidaristic wage demands by low-paid workers.

The most significant case of transnational union bargaining co-ordination in existence is in the maritime shipping industry. A global union association, the International Transport Workers’ Federation (ITF), and a global employers’ federation, the International Maritime Employers’ Committee (IMEC), now negotiate over pay scales for seafarers on Flag of Convenience (FOC) ships. These negotiations set the pattern for pay and working conditions for a signifi-cant portion of the global seafaring work-force. The ITF brought about global wage bargaining by building and enforcing a global inter-union consensus between developed and developing countries around a uniform wage rate.

The negotiating power of the unions and their role in wage determination depends on the level of centralization of the wage bargaining system as well as on other institutional arrangements. In this study, we estimate a set of wage equations in order to study the employment effects of different unions’ stances in wage determination as well as to investigate other characteristics of employment in Greek manufacturing. We discriminate between workers and employees (blue- and white-collar workers) and between sectors in order to capture differences in the relative supply as well as differences in the negotiating power among the staff of the same industry. Empirical findings reveal that the persistence of unemployment arises as a result of the great bargaining power of the unions in negotiations at a sectoral level. White-collar workers exhibit a stronger negotiating power compared with blue-collar workers because of differences in the institutional framework.

We construct a model integrating the efficiency wage model of Shapiro–Stiglitz (1984) (SS), with an individual wage bargaining model in the Diamond–Mortensen–Pissarides (DMP) tradition where firms and workers form pairwise matches. We show that when workers may threaten to shirk on the job and there is individual wage bargaining, the wage is always higher and employment lower than in either the SS model, or the (appropriately modified) DMP model. When firms determine workers’ efforts unilaterally, efforts are set inefficiently low in the SS model. In the bargaining model, effort is higher, and is first best when the worker non–shirking constraint does not bind. The overall equilibrium allocation may then be more or less efficient than in the SS model, but is always less efficient than in a pure bargaining model with no moral hazard.

This paper reviews the measurement of equilibrium unemployment in Australia using the Phillips curve. To provide a theoretical framework through which these measurement exercises can be understood, the theory of equilibrium unemployment based on wage bargaining is also described and reviewed. The paper shows how studies have moved from specifying a unique and constant equilibrium rate of unemployment to specifications which emphasise the influence of unemployment benefits, hysteresis and a range of equilibrium rates of unemployment.

This paper analyses the organisation of wage bargaining in multiproduct firms since it affects the distribution of power between workers and firms. We assume that each firm has two plants and chooses who bargains the wage with the workers: either the head of the firm or the manager of each plant. Similarly, in each firm, its workers choose whether they set up plant unions or a single union.

We use MONASH, a dynamic general equilibrium model, in an analysis of the macroeconomic effects of combining a freeze on Award wage rates in Australia with the granting of tax credits to low-wage workers in low-income families. Our results suggest that if this policy were successful in lowering the actual real before-tax wage rates of workers in the Award system, then it would have favourable short-run effects on aggregate employment. These effects would persist into the long run if the policy led to rightward shifts in labour supply curves. The downside risk of the policy is that it would be counteracted by over-Award payments, leaving a budgetary problem with no compensating employment gain. At the same time, the Award system would be rendered irrelevant to the determination of wage rates, possibly increasing the costs of wage bargaining.

Recent analyses of wage bargaining has emphasized the distinction between insiders and outsiders, yet one typically assumes that insiders and recently hired outsiders are paid the same wage. We consider a model where the starting wage for outsiders may be lower than the insider wage, but incentive constraints associated with turnover affect the form of the contract. We examine under what conditions the starting wage is linked to the insider wage so that increased bargaining power of insiders raises the starting wage and reduces hiring of outsiders.

This paper investigates the impact of payroll taxes on unemployment and welfare in a model with household production and union firm wage bargaining. It turns out that unemployment, most likely, fal ...

Delegation of wage determination is modelled as the transferral of decision-making rights to better-informed agents. The rank and file of trade unions has less information and can, therefore, benefit from delegation. However, delegation might be disadvantageous for union members, since delegates pursue their own objectives. Also, delegates might incur a utility reduction, since becoming a delegate implies forfeiting a better-paid outside option. We investigate under what conditions delegation of wage bargaining power is beneficial for union members and their potential leaders. The wage and employment effects of delegation are derived.

Efficient labour contracts on wages and employment could contribute to a reduction in unemployment in Europe. Their implementation is hindered by institutional settings and asymmetric incentives at different levels of the bargaining process. Employed workers have no incentives to forego wage increases at the firm level for potential employment gains, while employers’ federations possess no means to guarantee an employment increase for the sector covered by a wage agreement. Decentralization of wage bargaining does not solve this incentive problem. It is demonstrated that the introduction of marketable certificates may reduce the asymmetric incentive effects enabling contracts with higher employment.

Given an oligopolistic product market, trade unions organized at firm level want to coordinate their wage bargaining activities, even if they are self interested. In this paper a situation is analysed, where for some exogenous reasons a complete centralization is not possible. Unions could try to coordinate wage-setting by "wage leadership". The outcome of such "wage leadership" is compared with the outcome of an uncoordinated bargaining and results in higher utilities for all unions. But the resulting wages and employment levels are not symmetrically neither for the unions nor for firms. Employment levels will change in different directions. In the "wage leader" firm employment falls and in the "follower" firm employment rises compared to an uncoordinated wage bargaining. This may cause problems with the implementation of "wage leadership". (author's abstract)