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Effective Labor Relations Laws and Social Welfare

Author

Listed:
  • Landeo, Claudia

    (University of Alberta, Department of Economics)

  • Nikitin, Maxim

    (National Research University Higher School of Economics)

Abstract

Effective labor relations laws determine the allocation of bargaining power between the parties involved in labor disputes, and hence, influence social welfare. The right to strike, the types of legal strikes, and the right to hire replacement workers are fundamental components of labor relations laws in the public sector. Strikes by public school teachers, which are common in real-world settings, involve particularly high social costs. We theoretically study the social welfare effects of labor relations laws that permit the effective use of replacement teachers in case of strikes. These laws refer to the explicit right to hire replacement teachers and to the prohibition of intermittent strikes. We present a sequential bargaining game of incomplete information. Our model explicitly includes a law component, which captures the impact of effective labor relations laws. We conduct social welfare analysis and demonstrate that these laws reduce bargaining impasse and increase social welfare.

Suggested Citation

  • Landeo, Claudia & Nikitin, Maxim, 2015. "Effective Labor Relations Laws and Social Welfare," Working Papers 2015-11, University of Alberta, Department of Economics.
    • Handle: RePEc:ris:albaec:2015_011
    as

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    References listed on IDEAS

    as
    1. Cramton, Peter & Tracy, Joseph, 1998. "The Use of Replacement Workers in Union Contract Negotiations: The U.S. Experience, 1980-1989," Journal of Labor Economics, University of Chicago Press, vol. 16(4), pages 667-701, October.
    2. Farmer, Amy & Pecorino, Paul, 2002. "Pretrial bargaining with self-serving bias and asymmetric information," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 163-176, June.
    3. Claudia M. Landeo, 2018. "Law and economics and tort litigation institutions: theory and experiments," Chapters, in: Joshua C. Teitelbaum & Kathryn Zeiler (ed.), Research Handbook on Behavioral Law and Economics, chapter 9, pages 247-268, Edward Elgar Publishing.
    4. Claudia M. Landeo & Maxim Nikitin & Sergei Izmalkov, 2013. "Incentives for care, litigation, and tort reform under self-serving bias," Chapters, in: Thomas J. Miceli & Matthew J. Baker (ed.), Research Handbook on Economic Models of Law, chapter 6, pages 112-155, Edward Elgar Publishing.
    5. Benjamin Dachis & Robert Hebdon, 2010. "The Laws of Unintended Consequence: The Effect of Labour Legislation on Wages and Strikes," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 304, June.
    6. Thomas J. Miceli & Matthew J. Baker (ed.), 2013. "Research Handbook on Economic Models of Law," Books, Edward Elgar Publishing, number 14720.
    7. Claudia M. Landeo & Maxim Nikitin & Scott Baker, 2007. "Deterrence, Lawsuits, and Litigation Outcomes Under Court Errors," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(1), pages 57-97, April.
    8. Linda Babcock & Xianghong Wang & George Loewenstein, 1996. "Choosing the Wrong Pond: Social Comparisons in Negotiations That Reflect a Self-Serving Bias," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(1), pages 1-19.
    9. Michele Campolieti & Robert Hebdon & Benjamin Dachis, 2014. "The Impact of Collective Bargaining Legislation on Strike Activity and Wage Settlements," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 53(3), pages 394-429, July.
    10. Babcock, Linda & Landeo, Claudia M., 2004. "Settlement escrows: an experimental study of a bilateral bargaining game," Journal of Economic Behavior & Organization, Elsevier, vol. 53(3), pages 401-417, March.
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    More about this item

    Keywords

    Labor Relations Laws; Social Welfare; Bargaining Impasse; Replacement Teachers Laws; Intermittent Strikes Laws; Non-Cooperative Games; Asymmetric Information; Perfect Bayesian Equilibrium;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J58 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Public Policy

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