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Wage bargaining and partial ownership

Author

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  • Juan Carlos Bárcena-Ruiz
  • María Luz Campo

Abstract

This paper analyzes wage negotiation between firms and unions when cross-participation exists at ownership level. We consider two shareholders and two firms: one firm is jointly owned by the two shareholders and the other is owned by a single shareholder. Labor is unionized and the firms produce substitute products. We show that partial ownership increases the bargaining strength of the firm owned by a single shareholder; although this firm pays lower wages produces less output than the other firm. Compared with the case in which each firm is owned by a single shareholder, partial ownership reduces the wage paid by firms, the output of industry and therefore employment. Whether firms obtain greater or lower profit depends on the degree to which goods are substitutes. In fact, we obtain the surprising result that when the degree to which goods are substitutes is low enough, the firm that is owned by a single shareholder makes more profit than the other firm.

Suggested Citation

  • Juan Carlos Bárcena-Ruiz & María Luz Campo, 2010. "Wage bargaining and partial ownership," Estudios de Economia, University of Chile, Department of Economics, vol. 37(1 Year 20), pages 27-42, June.
    • Handle: RePEc:udc:esteco:v:37:y:2010:i:1:p:27-42
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    References listed on IDEAS

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    More about this item

    Keywords

    Partial Ownership; Wage Bargaining; Heterogeneous Goods;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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