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Strikes and Wages: A Test of a Signalling Model

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  • David Card

Abstract

This paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the level of profitability of the firm. The implications of the model are then tested using data on wage outcomes, strike probabilities, and strike durations for a large sample of collective bargaining agreements. Negotiated wages are found to depend negatively on regional unemployment rates and positively on industry-specific selling prices. Contrary to the basic premise of the model, however, there is no evidence of a systematic relation between wages and strike outcomes. Increases in unemployment are found to decrease the probability of strikes, while increases in industry selling prices increase the probability of disputes. Strike durations are only weakly related to unemployment and industry prices, but are negatively correlated with industry output.

Suggested Citation

  • David Card, 1988. "Strikes and Wages: A Test of a Signalling Model," NBER Working Papers 2550, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:2550
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    16. repec:fth:prinin:215 is not listed on IDEAS
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    Cited by:

    1. Card, David, 1990. "Unexpected Inflation, Real Wages, and Employment Determination in Union Contracts," American Economic Review, American Economic Association, vol. 80(4), pages 669-688, September.
    2. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
    3. John M. Abowd & Thomas Lemieux, 1991. "The Effects of International Competition on Collective Bargaining Outcomes: A Comparison of the United States and Canada," NBER Chapters, in: Immigration, Trade, and the Labor Market, pages 343-367, National Bureau of Economic Research, Inc.
    4. Fernandez, Raquel & Glazer, Jacob, 1991. "Striking for a Bargain between Two Completely Informed Agents," American Economic Review, American Economic Association, vol. 81(1), pages 240-252, March.
    5. Michael Huberman & Denise Young, 1995. "What Did Unions Do... An Analysis of Canadian Strike Data, 1901-14," CIRANO Working Papers 95s-17, CIRANO.
    6. Cramton, Peter C & Tracy, Joseph S, 1994. "Wage Bargaining with Time-Varying Threats," Journal of Labor Economics, University of Chicago Press, vol. 12(4), pages 594-617, October.
    7. Jellal, Mohamed, 2014. "Theory of civil war under asymmetric information," MPRA Paper 57600, University Library of Munich, Germany.

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