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Wage Bargaining with Endogenous Profits, Overtime Working and Heterogeneous Labor

Author

Listed:
  • Karen Mumford

    (Princeton University)

  • Steve Dowrick

    (Warwick University)

Abstract

This paper estimates the role of insider power in wage determination in a unionized industry, examining the direction and magnitude of biases which may arise through failure to control for variation in both hours of work and the composition of the labor force and through failure to control for the endogeneity of measured profits. Furthermore, by examining the extent to which rent-sharing is related to exogenous demand shocks rather than to potentially endogenous productivity, we provide a test of the bargaining and 'pure' efficiency wage models, finding that the majority of the insider weighting can be explained by the bargaining model. Our data set covers earnings and profitability in the New South Wales coal industry from 1952 to 1987. We estimate a partial adjustment model and test for co-integration of the time series in order to establish whether or not a long-run stable equilibrium exists.

Suggested Citation

  • Karen Mumford & Steve Dowrick, 1990. "Wage Bargaining with Endogenous Profits, Overtime Working and Heterogeneous Labor," Working Papers 657, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:277
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    Citations

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    Cited by:

    1. Rod Tyers, 2015. "Service Oligopolies and Australia's Economy-Wide Performance," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 48(4), pages 333-356, December.
    2. Filipe Almeida‐Santos & Karen A. Mumford, 2004. "Employee Training in Australia: Evidence from AWIRS," The Economic Record, The Economic Society of Australia, vol. 80(s1), pages 53-64, September.
    3. Karen Mumford & Peter N. Smith, "undated". "Job Reallocation and Average Job Tenure: Theory and Workplace Evidence From Australia," Discussion Papers 00/01, Department of Economics, University of York.
    4. Filipe Almeida‐Santos & Karen Mumford, 2005. "Employee Training And Wage Compression In Britain," Manchester School, University of Manchester, vol. 73(3), pages 321-342, June.
    5. Noriaki Matsushima & Fumitoshi Mizutani, 2014. "How Does Market Size Affect Vertical Structure When Considering Vertical Coordination? Application to the Railway Industry," Pacific Economic Review, Wiley Blackwell, vol. 19(5), pages 657-676, December.
    6. Natália Monteiro & Miguel Portela & Odd Straume, 2011. "Firm Ownership and Rent Sharing," Journal of Labor Research, Springer, vol. 32(3), pages 210-236, September.
    7. Matsushima Noriaki & Mizuno Tomomichi, 2012. "Equilibrium Vertical Integration with Complementary Input Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 12(1), pages 1-32, June.
    8. Karen Mumford & Peter N. Smith, 2004. "Job Reallocation, Employment Change And Average Job Tenure: Theory And Workplace Evidence From Australia," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(3), pages 402-421, August.
    9. Margarita Katsimi & Sarantis Kalyvitis & Thomas Moutos, 2009. ""Unwarranted" Wage Changes and the Return on Capital," CESifo Working Paper Series 2804, CESifo.
    10. Matsushima, Noriaki & Mizuno, Tomomichi, 2013. "Vertical separation as a defense against strong suppliers," European Journal of Operational Research, Elsevier, vol. 228(1), pages 208-216.
    11. Elizabeth Webster & Yi‐Ping Tseng, 2002. "The Determinants of Relative Wage Change in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 35(1), pages 70-84, March.
    12. Frank Scharr, 2005. "Tarifbindung, Rententeilung und Konzessionsverträge als Einflussgrößen der Lohnhöhe in Unternehmen : eine Untersuchung mit Mikrodaten für thüringische Firmen," ifo Dresden Studien, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 39, May.
    13. Kitamura, Hiroshi & Matsushima, Noriaki & Sato, Misato, 2018. "Exclusive contracts with complementary inputs," International Journal of Industrial Organization, Elsevier, vol. 56(C), pages 145-167.
    14. Parantap Basu, 2009. "Understanding Labour Market Frictions: An Asset Pricing Approach," Bulletin of Economic Research, Wiley Blackwell, vol. 61(4), pages 305-324, October.

    More about this item

    Keywords

    bargaining; wage determination; rent-sharing; labor; insider power;
    All these keywords.

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets

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