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With one‐fifth of the UK labour force employed in the public sector, public sector pay and its interaction with private sector pay is an important driver of the macroeconomy. Using new data on sector‐level earnings and sector–industry‐level pay settlements, this paper addresses the fundamental question of which sector leads and which follows in terms of earnings determination. We find that in the long run, public sector wages adjust to wages set in the private sector, maintaining a consistent relationship. We further find that there can be significant wage spillovers from the public sector to the private sector in the short run. These tend to be more pronounced for private sector industries that are domestically facing, characterized by low worker bargaining power, or reliant on public sector inputs. This paper's findings have important implications for macroeconomic policy that aims to balance inflationary forces and fiscal funding pressures. This paper is part of the Economica 100 Series. Economica, the LSE "house journal" is now 100 years old. To commemorate this achievement, we are publishing 100 papers by former students, as well as current and former faculty. Peter Dolton is a senior Fellow at the CEP, LSE. [ABSTRACT FROM AUTHOR]

This paper analyses the determinants of wealth inequality, measured as the share of wealth owned by the top 1 percent wealthiest individuals. We find that labor's bargaining power is a significant and important determinant of top wealth shares. Using a semi‐structural vector autoregression (SVAR) model for the period 1970–2019, we estimate that shocks to labor's bargaining power explain 32 percent, 8 percent and 32 percent of the variation around the long‐term trend in wealth inequality in the UK, USA and France, respectively. [ABSTRACT FROM AUTHOR]

Although outcome measurement is a key element of outcome-based contracting, the main challenges related to the measurement processes in these programs are still under-investigated. To fill this gap, this article examinates the challenges and opportunities of measuring social outcomes in outcome-based contracting, focusing particularly on three main areas: the design of measurement processes; the definition of outcomes, metrics, and targets; and the practical implications of the measurement processes. The analysis focuses on four case studies in the UK. Regarding the measurement of payment outcomes, our results bring into question the viability of outcome-based contracting for providing evidence that can inform policymaking. However, the results highlight the opportunities emerging from the measurement of outcomes not related to the payment mechanism and from involving different stakeholders in the measurement process. Finally, we discuss future research on the influence of governance and bargaining power on the measurement of outcome-based contracting. [ABSTRACT FROM AUTHOR]

The use of big data by large food retailers is increasing their bargaining power against the agri-food cooperative sector. The aim of this study was to determine the social media behaviour of food retailers in Spain and the UK, and to identify significant changes pre- and post-COVID-19 pandemic. The study analysed Twitter data collected from 16 food retailers; a total of 102,200 valid tweets were extracted from their official Twitter accounts. A term frequency analysis and a social network analysis of food retailers' Twitter behaviour were carried out. The results obtained show differences for both UK and Spanish retailers before and during the COVID-19 pandemic. For agri-food cooperatives with little bargaining power in the supply chain of fresh produce, data analysis is a key factor in improving their competitive positioning. These findings should be of value to data scientists as well as managers responsible for forming strategies in agri-food firms that have large food retailers as clients. Finally, the study also confirms that, for agri-food cooperatives, analysing tweet content is a cheap and useful tool for understanding customer behaviour. [ABSTRACT FROM AUTHOR]

Existing studies of the political determinants of top incomes and inequality tend to focus on developments within individual countries, neglecting the role of interdependencies that transcend national borders. This article argues that the sharp rises in top incomes observed in recent years are in part a product of specific features originating in the US political economy, which were subsequently exported to other economies through the global expansion of US-based financial investors. To test the argument, we collect fine-grained micro-level data on executive pay and firm ownership structures for a comprehensive sample of publicly listed firms in the United Kingdom (UK). Our analyses uncover robust evidence that the Americanization of UK firm ownership leads to the financialization of remuneration practices and sizeable pay increases for high-level managers at those firms. Scrutinizing the causal mechanisms underlying this effect, we find them to be more consistent with changes in bargaining power inside firms rather than coercion from outside or exogenous shifts in labor markets for executives. The findings show the disruptive potential of Wall Street investments abroad to empower local managerial elites to capture greater rents and, more generally, demonstrate the need to take the transnational seriously in order to understand patterns of inequality in the global political economy. [ABSTRACT FROM AUTHOR]

Universal basic income (UBI) is a system where everyone in a community is given a regular fixed amount of money from government intended to meet basic needs and free from any conditionality. Such a system is cheap and easy to administer as there is no means testing or checks on conditionality. There are a growing number of trials across the world and increasing support for such a scheme in the UK. A decade of austerity policies in the UK followed by the onset of the COVID-19 pandemic has heightened the views of some that UBI would not only address the issue of poverty and low-paid work but would serve as a response to growing automation in the workplace. It might also increase the bargaining power of workers who would be less worried about losing their job if they had the cushion of UBI. [ABSTRACT FROM AUTHOR]

Exploiting changes in the geography of economic integration in Europe, this paper quantifies the effects of Brexit from ex post to ex ante using structural gravity. By isolating the directional treatment effects of EU agreements for the UK, the analysis reveals important heterogeneity across agreements, sectors, and within pairs. We find that these directional effects matter for the size and distribution of the welfare effects of Brexit—the withdrawal of the UK from EU agreements resulting into a return of trade costs to the situation quo ante. We make this point with the help of a modern multi-sector trade model that is able to capture inter- and intranational production networks. In line with other papers, the welfare costs of Brexit are higher in the UK than in most other EU countries. However, heterogeneity tends to attenuate overall costs while giving rise to substantial heterogeneity between EU27 members and sectors. A scenario that could shift bargaining power eliminates asymmetries in the costs of Brexit as soon as the UK fully liberalizes its market. [ABSTRACT FROM AUTHOR]

This paper considers a vertically related industry where an upstream supplier simultaneously and independently negotiates linear tariffs with two asymmetrically capacity constrained downstream retailers endowed with (possibly) asymmetric bargaining powers over the purchase of an input. We introduce price leadership as the type of downstream competition. An increase in the upstream supplier's bargaining power toward the large firm induces a positive externality on the small firm's tariff. We also obtain that, a priori the small firm may end up (i) demanding a larger stock of the input and (ii) paying less for it. Our model also proves useful to show that the well‐known countervailing buyer power hypothesis could not hold because an integrated downstream firm might negotiate a better input price without any pass‐through to the final consumers. We mainly relate our analysis to the UK grocery market and to the recent empirical evidence regarding its functioning. [ABSTRACT FROM AUTHOR]

Control over borders and access to the common market were key issues in the Brexit negotiations concerning the UK's future relationship with the European Union (EU). The parties have expressed strong political commitments regarding both issues. We explore a sequential model, which allows us to analyze the effects of these commitments. It is assumed that the UK controls labor mobility, and that the EU can constrain trade to dissuade future secession, or to punish the UK. We find that the EU has an incentive to claim trade and mobility to be inseparable freedoms whether that reflects its true preferences or not. Our model also implies that both parties are better off if the UK commits to a mobility policy first. Moreover, UK contributions to the EU budget can substitute for trade restriction and allow for a more efficient outcome. Finally, while the EU lacks bargaining power without a readiness to impose trade restrictions, a stronger will to punish the UK does not affect mobility but harms trade. Hence, fueling resentment about Brexit does not benefit the EU. [ABSTRACT FROM AUTHOR]

Though the UK is weaker than the EU on key metrics of bargaining power, the British approach to the first phase of the Brexit negotiations has been characterized by hard bargaining. Efforts to explain this puzzle have focused on constraints at the domestic level, but have not engaged with the cultural sources of bargaining style highlighted by constructivist scholars. Drawing on a series of interviews, this article suggests a number of cultural factors have influenced the UK's decision to adopt a hard bargaining strategy, including the country's majoritarian institutional culture, its weak socialization into the EU, overstated perceptions of its own capabilities, the prevailing conservative political ideology, and a longstanding preference for 'divide and rule' diplomatic strategies. Our findings suggest not only that the UK's choice of negotiating strategy is sub‐optimal but also that theories of bargaining need to pay attention to cultural factors predisposing actors to particular strategies. [ABSTRACT FROM AUTHOR]

The task framework has focused on employee survey data to analyze how computer use changes the content of jobs. In this article, we add another factor of work design, namely trade union presence. Using data from the UK Skills and Employment Surveys for the period 1997–2012, we find that union presence is associated with more Tayloristic jobs involving less autonomy, lower relevance of problem solving, and more control. In line with theory, the union effect moves in the opposite direction to the effect of computer use. The article has two important general implications. First, the Tayloristic/holistic distinction is an instructive dichotomy to evaluate changes in work design. Second, the presence of unions may induce managers to design jobs in Tayloristic ways in order to curb union bargaining power. [ABSTRACT FROM AUTHOR]

Objective: Unhealthy food and drink consumption is associated with a range of physical and mental health concerns. In response, public health policies have been developed targeting a reduction in obesity in particular. In the present commentary we argue that government-industry partnerships have reduced the effectiveness of resultant policies and explore why.Design: Perspectives of authors.Setting: UK.ParticipantsPopulations in the UK; UK Government.Results: Industry involvement has presented three interrelated challenges for the UK Government: (i) balancing collaboration while maintaining appropriate distance from industry stakeholders; (ii) resultant production of 'watertight' and effective legislation or intervention; and (iii) actual or perceived limited sanctioning or bargaining power.Conclusions: Industry involvement in public health policy making has led to weak action. Support with policy implementation (rather than development) and genuine 'buy-in' from industry could accelerate the pace of public health improvement. [ABSTRACT FROM AUTHOR]

This paper proposes a new theoretical framework aimed at understanding the link between technological change, skill premium, and employment. We build an endogenous growth model of directed technological change with vertical research and development (R&D) in which low-skilled workers might be organized in a trade union. This union can act as a monopoly seller of labor and decide unilaterally the low-skilled wage, or as a managerial union that bargains wage and employment with the employers' federation, i.e., firms. Our results suggest that (i) the impacts of trade unions on technological-bias and on the level of (un)employment crucially depend on their type and preferences; and (ii) trade unions can actually increase low-skilled wages and employment if they have some bargaining power and are employment-oriented. Furthermore, our framework provides some highlights to explain the relationship between wage dispersion and the deunionization process that occurred in the United Kingdom and the United States during the 1980s. [ABSTRACT FROM AUTHOR]

In the negotiations with EU-27 following the Brexit referendum, the UK has tried to replace opt-ins with opt-outs. It has over-estimated its own bargaining power and its capacity to divide and rule. High politics has prevailed over economics, and the Irish backstop provision has been the main stumbling block in getting an agreement through the House of Commons. Hard Brexiteers may decide to test EU and Irish resolve to the limit in what could turn out to be a dangerous chicken game. [ABSTRACT FROM AUTHOR]

We provide new evidence on retailers' pricing and advertising of store brands in the U.K. grocery markets. We analyse a simple Hotelling model in which retailers and manufacturers endogenously advertise their respective brands; we account for the impact of advertising on retailer–manufacturer bargaining and downstream competition. The model predicts that retailers advertise their store brands less when advertising is more rivalrous. We present empirical evidence consistent with this prediction. According to our model, aggregate consumer surplus can be higher with store brands than when they are absent from the market. [ABSTRACT FROM AUTHOR]

This paper presents a history of aggregate demand and supply shocks spanning 1900 – 2016 for the United Kingdom. Sign restrictions derived from a workhorse Keynesian model are used to identify the signs of those shocks. We compare the 30 largest shocks implied by a vector autoregressive model in unemployment and inflation with the narrative historical record. Our approach provides a new perspective on well-known events in economic history. We highlight two episodes of particular interest: an aggregate supply shock in the late 1920s, which we attribute to changes in the bargaining power of labor, and positive aggregate demand shocks in the mid-1970s, which we attribute to fiscal policy. [ABSTRACT FROM AUTHOR]

We investigate whether CEO power influences a firm’s decision to change its compensation system in response to regulatory and public pressure. In particular, we assess whether CEO power influences the choice of performance measures as a form of camouflage to minimize the impact of these reforms on their wealth. We examine one component of CEO pay, namely, the use of performance-vested stock option (PVSO) plans, and find that firms with powerful CEOs attach less challenging targets in the initial PVSOs granted to their CEOs. Such firms also appear to adopt PVSO plans early, and are more likely to do so when faced with public outrage over executive compensation. Our results suggest that powerful CEOs attempt to appease public outrage by quickly adopting PVSOs, but that adopting PVSOs early does not appear to be an optimal strategy for increasing shareholder value. Regulators intended that implementation of PVSOs would be beneficial to shareholders by improving the link between CEO pay and firm performance. However, our results indicate that powerful CEOs can negate some of the beneficial effect of PVSOs through their influence on adoption and choice of performance targets. [ABSTRACT FROM AUTHOR]

Prompted by a real-life observation in the UK retail market, a two-player Prisoners' Dilemma model of an alliance between two firms is adapted to include the response of a rival firm, resulting in a version of a three-player Prisoners' Dilemma. We use this to analyse the impact on the stability of the alliance of the rival's competition, either with the alliance or with the individual partners. We show that, while strong external pressure on both partners can cause Ally-Ally to become a Nash equilibrium for the two-player Prisoners' Dilemma, weak or asymmetric pressure that plays on the partners' differing objectives can undermine the alliance. As well as providing new insights into how allies should respond if the alliance is to continue, this also illustrates how a third party can most effectively cause the alliance to become unsustainable. We create a new game theoretic framework, adding value to existing theory and the practice of alliance formation and sustainability. [ABSTRACT FROM AUTHOR]

The 1870 Married Women's Property Act created major change in nineteenth-century British property law. Until the passage of the Act, a husband had legal ownership over his wife's personal property and managerial rights over her real property. The Act granted British women the right to own and control personal property and therefore serves as a natural experiment to test the impact of a legislative change on the distribution of household resources. The article examines whether the Act enabled women to gain a larger share of household resources and alter the distribution of resources within the household. The results indicate that the rights granted to women by the Act dramatically increased the bargaining power and property of wives: wives married after the Act owned a larger share of total household property and invested less of their own income and more of their husband's in forms of property they owned and controlled. [ABSTRACT FROM AUTHOR]

The focus of this paper is on the analysis of market imperfections in the French and U.K. wheat value chains. We used mark-up and mark-down models and stochastic frontier analysis to estimate the degree of market imperfections in two completely different wheat-to-bread chains for two stages/sectors—milling and baking. Our results reveal some degree of market imperfections within the input and output markets for both the milling and baking sectors in France and the United Kingdom. However, the abuse of bargaining power is especially pronounced in the input market for the second stage of wheat processing, particularly in the French baking sector. However, we did not observe the expected positive association between the degree of market imperfections and company size except for a group of middle, large, and very large companies within the millers' input market. Small companies indicate considerably high values of "Lerner"/Lerner indices, suggesting a benefit from other sources of competitive advantage (such as quality, niche markets, etc.). [ABSTRACT FROM AUTHOR]

This study adopts a potential outcomes framework to explore how nonstandard schedules (i.e., employment during nights, evenings, and weekends) affect partnership quality (PQ). Competing theories of positive and negative selection are proposed based on the contention that there will be heterogeneous returns to partnerships from nonstandard schedules (in terms of penalties and benefits) that will depend on how and why partners have selected into these arrangements. Mahalanobis Distance Matching techniques are then employed to mimic blocked randomization, simulate potential outcomes and identify patterns of heterogeneous effects using a sample of 21,766 workers in co-resident partnerships included in the UK Household Longitudinal Study (2010–2017). Results indicate that after correcting for baseline selection, weekend work only negatively affects PQ for mothers, whilst nonstandard hours take their most negative effect on PQ when worked by women without children. Maternal nonstandard hour work, on the other hand, is shown to positively affect PQ. However, results suggest this positive effect may often be obscured by patterns of negative selection. That is, the mothers most commonly observed in nonstandard hours are in partnerships that stand to benefit the least. In contrast, consistent patterns of positive selection into both nonstandard days and hours are observed for men without children, demonstrating the centrality of bargaining power and household constraints for selection. Such findings highlight the need to consider complex and gendered processes of household and socioeconomic selection when studying the relationship between nonstandard schedules and outcomes relating to family cohesion. [ABSTRACT FROM AUTHOR]