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On the incentives to increase input efficiency under monopoly trade unions

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  • Biswas, Tapan
  • McHardy, Jolian

Abstract

(Originally published in the Journal of Economic Behaviour and Organization 2007, 62(4), 657-669) - We examine the effects of and the incentives for increasing input efficiency within a spatially segregated Cournot duopoly with monopoly trade unions whose utility functions depend on both wages and employment. We show that with neoclassical as well as Leontief technology, unions raise wages to appropriate fully the gains from labor-saving technological (or organisational) improvements, leaving the firm with no incentive to invest in increasing the efficiency of workers. However, capital-saving technological improvement may be profitable depending on the elasticity of substitution. Finally, we examine the implication of a fixed minimum wage (or competitive labor market) in one country. - © 2006 Elsevier B.V. All rights reserved.
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Suggested Citation

  • Biswas, Tapan & McHardy, Jolian, 2007. "On the incentives to increase input efficiency under monopoly trade unions," Journal of Economic Behavior & Organization, Elsevier, vol. 62(4), pages 657-669, April.
    • Handle: RePEc:eee:jeborg:v:62:y:2007:i:4:p:657-669
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    References listed on IDEAS

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    1. Baldwin, Carliss Y, 1983. "Productivity and Labor Unions: An Application of the Theory of Self-Enforcing Contracts," The Journal of Business, University of Chicago Press, vol. 56(2), pages 155-185, April.
    2. Biswas, Tapan & McHardy, Jolian P., 2003. "The long-run effect of a wage policy on employment," Journal of Policy Modeling, Elsevier, vol. 25(3), pages 267-273, April.
    3. Rowthorn, Robert, 1999. "Unemployment, Wage Bargaining and Capital-Labour Substitution," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 23(4), pages 413-425, July.
    4. Duncan, Greg J & Stafford, Frank P, 1980. "Do Union Members Receive Compensating Wage Differentials?," American Economic Review, American Economic Association, vol. 70(3), pages 355-371, June.
    5. Calabuig, Vicente & Gonzalez-Maestre, Miguel, 2002. "Union structure and incentives for innovation," European Journal of Political Economy, Elsevier, vol. 18(1), pages 177-192, March.
    6. Lionel McKenzie, 1957. "Demand Theory Without a Utility Index," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 24(3), pages 185-189.
    7. Addison, John T & Chilton, John B, 1998. "Self-Enforcing Union Contracts: Efficient Investment and Employment," The Journal of Business, University of Chicago Press, vol. 71(3), pages 349-369, July.
    8. Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-344, April.
    9. 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.
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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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