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Unemployment and the "Labour-Management Conspiracy"

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  • Karp, L.
  • Paul, T.

Abstract

Management and a union bargain sequentilally, first choosing a contract which will later determine the level of employment, and then choosing a wage. The government then chooses an output subsidy, after which the industry chooses employment according to the contract. The presence of a natural turnover rate in the unionized sector creates unemployment whenever the union wage exceeds the competitive wage. Government intervention can increase both the equilibrium amount of unemployment and worsen the intersectoral allocation of labour; intervention can also reverse the relation between th eequilibrium amount of unemployment andthe flexibility of the labour market.

Suggested Citation

  • Karp, L. & Paul, T., 1998. "Unemployment and the "Labour-Management Conspiracy"," G.R.E.Q.A.M. 98a27, Universite Aix-Marseille III.
    • Handle: RePEc:fth:aixmeq:98a27
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    References listed on IDEAS

    as
    1. Karp, Larry & Paul, Thierry, 2000. "Unemployment and the 'Labour-Management Conspiracy.'," Economic Journal, Royal Economic Society, vol. 110(460), pages 113-135, January.
    2. George A. Akerlof & Andrew K. Rose & Janet L. Yellen & Helga Hessenius, 1991. "East Germany in from the Cold: The Economic Aftermath of Currency Union," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 1-106.
    3. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    4. Rodrik, Dani, 1986. "Tariffs, subsidies, and welfare with endogenous policy," Journal of International Economics, Elsevier, vol. 21(3-4), pages 285-299, November.
    5. David Begg & Richard Portes, 1993. "Eastern Germany since unification: wage subsidies remain a better way," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 1(4), pages 383-400, December.
    6. Bean, Charles R, 1994. "European Unemployment: A Survey," Journal of Economic Literature, American Economic Association, vol. 32(2), pages 573-619, June.
    7. Burda, Michael C & Funke, Michael, 1992. "Trade Unions, Wages and Structural Adjustment in the New German States," CEPR Discussion Papers 652, C.E.P.R. Discussion Papers.
    8. Dani Rodrik, 1987. "Policy Targeting with Endogenous Distortions: Theory of Optimum Subsidy Revisited," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 102(4), pages 903-911.
    9. Kiminori Matsuyama, 1990. "Export Subsidies as an Outcome of the Management-Labor Conspiracy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(3), pages 803-813.
    10. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
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    Cited by:

    1. Karp, Larry & Paul, Thierry, 2000. "Unemployment and the 'Labour-Management Conspiracy.'," Economic Journal, Royal Economic Society, vol. 110(460), pages 113-135, January.

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    More about this item

    Keywords

    UNEMPLOYMENT ; WAGES ; BARGAINING ; SUBSIDIES;
    All these keywords.

    JEL classification:

    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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