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Modern regulation of firms in developing countries

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  • Jellal, Mohamed

Abstract

In developing countries, empirical evidence suggests that labor unions entail a positive wage gap for unionized workers, in particular in monopolistic and publicly controlled firms. In this paper, we analyze how the presence of a labor union affects the regulation of a monopoly under asymmetric information. Since part of the informational rent left to the monopolistic firm benefits to the syndicate, we prove that the regulator is induced to lower the rent when the union has a large bargaining power. The net consumers' surplus can either increase or decrease with the firm's bargaining power depending on the firm's effciency type

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  • Jellal, Mohamed, 2014. "Modern regulation of firms in developing countries," MPRA Paper 57207, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:57207
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    References listed on IDEAS

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    More about this item

    Keywords

    Asymmetric information; labor union; monopolistic firm; regulation ; incentives;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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