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Efficient Bargains and the McDonald-Solow Conjecture

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  • Clark, Andrew

Abstract

This article explores the conjecture of I. McDonald and R. Solow (1981) that the outcome from a bargain over wages and employment can be approximately achieved by a bargain over wages and the labor-capital ratio (the "crew size"), where the latter can be argued to be more representative of the real world. The author derives a crew size contract curve and shows that this conjecture is not generally true. A test to determine which model is generating real-world data is suggested. The wage rigidity results derived by McDonald and Solow for their contract cure do not apply to this crew size contract curve. Copyright 1990 by University of Chicago Press.

Suggested Citation

  • 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.
    • Handle: RePEc:ucp:jlabec:v:8:y:1990:i:4:p:502-28
    DOI: 10.1086/298232
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    Cited by:

    1. Cukierman, Alex & Lippi, Francesco, 1999. "Central bank independence, centralization of wage bargaining, inflation and unemployment:: Theory and some evidence," European Economic Review, Elsevier, vol. 43(7), pages 1395-1434, June.
    2. 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.
    3. Luca Gori & Luciano Fanti, 2009. "Right-to-manage unions endogenous growth and welfare," Economics Bulletin, AccessEcon, vol. 29(2), pages 903-917.
    4. Chang, Juin-jen & Shaw, Ming-fu & Lai, Ching-chong, 2007. "A "Managerial" trade union and economic growth," European Economic Review, Elsevier, vol. 51(2), pages 365-384, February.
    5. Filip Abraham & Jozef Konings & Stijn Vanormelingen, 2009. "The effect of globalization on union bargaining and price-cost margins of firms," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(1), pages 13-36, April.
    6. Vannini, Stefano & Bughin, Jacques, 2000. "To be (unionized) or not to be? A case for cost-raising strategies under Cournot oligopoly," European Economic Review, Elsevier, vol. 44(9), pages 1763-1781, October.
    7. 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.
    8. Lei Ji & Juin‐Jen Chang & Chien‐Yu Huang, 2016. "Unionization, market structure, and economic growth," Southern Economic Journal, John Wiley & Sons, vol. 82(3), pages 935-951, January.
    9. Lai, Chung-Hui & Wang, Vey, 2010. "The effects of unionization in an R&D growth model with (In)determinate equilibrium," MPRA Paper 27748, University Library of Munich, Germany.
    10. Alipranti, Maria & Manasakis, Constantine & Petrakis, Emmanuel, 2024. "Corporate social responsibility and bargaining in unionized markets," Journal of Economic Behavior & Organization, Elsevier, vol. 224(C), pages 949-965.
    11. 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.
    12. Chang, Juin-jen & Liu, Chia-ying & Wang, Wei-neng, 2018. "Conspicuous consumption and trade unionism," Journal of Macroeconomics, Elsevier, vol. 57(C), pages 350-366.
    13. Shu‐hua Chang & Juin‐jen Chang, 2015. "Optimal government spending in an economy with imperfectly competitive goods and labor markets," Southern Economic Journal, John Wiley & Sons, vol. 82(2), pages 385-407, October.
    14. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
    15. repec:pri:indrel:dsp01cc08hf62w is not listed on IDEAS
    16. Chung-Hui Lai & Chen-Sheng Yang, 2018. "The Effects of Unionization in an R&D Growth Model with (In)determinate Equilibrium," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 14(2), pages 107-132, August.
    17. Buccella, Domenico & Fanti, Luciano, 2020. "Do labour union recognition and bargaining deter entry in a network industry? A sequential game model," Utilities Policy, Elsevier, vol. 64(C).
    18. Chun‐Chieh Huang & Juin‐Jen Chang & Hsiao‐Wen Hung, 2020. "Progressive Tax and Inequality in a Unionized Economy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 122(1), pages 38-80, January.
    19. 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.
    20. Klasa, Sandy & Maxwell, William F. & Ortiz-Molina, Hernán, 2009. "The strategic use of corporate cash holdings in collective bargaining with labor unions," Journal of Financial Economics, Elsevier, vol. 92(3), pages 421-442, June.
    21. Christian Jansen, 2003. "Economic Effects of the New German Copyright Contract Law," Law and Economics 0302003, University Library of Munich, Germany.
    22. 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.

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