IDEAS home Printed from https://ideas.repec.org/p/ude/wpaper/1096.html
   My bibliography  Save this paper

A bargaining model with uncertainty and varying outside opportunities

Author

Listed:
  • Adriana Cassoni

    (Departamento de Economía, Facultad de Ciencias Sociales, Universidad de la República)

Abstract

The main purpose of this paper is to propose an alternative way of explaining – within the bargaining theory framework – the stylised fact of flat wages and employment bearing all the adjustment to shocks. Standard models predict this behaviour under the assumptions of a constant elasticity production function and a reservation wage independent of shocks. Once the latter is removed, however, the result holds no more. The proposed two-stage model, in which the second stage involves negotiations over employment after the state of nature is revealed, would allow to recover it as a consequence of the uncertainty agents face when bargaining over wages in the first stage. The model nests other formulations and allows for Pareto efficient and inefficient outcomes, depending on union power, agents' beliefs and the observed state of nature.

Suggested Citation

  • Adriana Cassoni, 1996. "A bargaining model with uncertainty and varying outside opportunities," Documentos de Trabajo (working papers) 1096, Department of Economics - dECON.
    • Handle: RePEc:ude:wpaper:1096
    as

    Download full text from publisher

    File URL: https://hdl.handle.net/20.500.12008/2301
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    2. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    3. Johnson, George E, 1990. "Work Rules, Featherbedding, and Pareto-optimal Union-Management Bargaining," Journal of Labor Economics, University of Chicago Press, vol. 8(1), pages 237-259, January.
    4. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398.
    5. Carruth, Alan A & Oswald, Andrew J, 1987. "On Union Preferences and Labour Market Models: Insiders and Outsi ders," Economic Journal, Royal Economic Society, vol. 97(386), pages 431-445, June.
    6. Naish, Howard F, 1988. "Optimal Union Wage Setting Behaviour and the Non-neutrality of Anticipated Monetary Changes," Oxford Economic Papers, Oxford University Press, vol. 40(2), pages 346-364, June.
    7. Maria Paz Espinosa & Changyong Rhee, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(3), pages 565-588.
    8. Oswald, Andrew J., 1982. "Uncertainty and the trade union," Economics Letters, Elsevier, vol. 9(1), pages 105-111.
    9. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Federico Echenique & Alvaro Forteza, 2000. "Are stabilization programs expansionary?," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 15(1), pages 65-89.
    2. Alvaro Forteza, 1995. "Welfare state dynamics," Documentos de Trabajo (working papers) 0896, Department of Economics - dECON.
    3. Walter García Fontes & Ruben Tansini, 1996. "The effects of trade liberalization on R&D investments: the case of the Uruguayan manufacturing industry," Documentos de Trabajo (working papers) 0396, Department of Economics - dECON.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Cassoni, Adriana & Labadie, Gastón J. & Fachola, Gabriela, 2002. "The Economic Effects of Unions in Latin America: Their Impact on Wages and the Economic Performance of Firms in Uruguay," IDB Publications (Working Papers) 3283, Inter-American Development Bank.
    2. A. Cassoni & G. Fachola & G. Labadie, 2001. "The impact of unions on the economic performance of firms," Documentos de Trabajo (working papers) 1501, Department of Economics - dECON.
    3. Sanz, Nicolas & Schwartz, Sonia, 2013. "Are pollution permit markets harmful for employment?," Economic Modelling, Elsevier, vol. 35(C), pages 374-383.
    4. Adriana Cassoni, 1999. "Labour demand in Uruguay before and after re-unionisation," Documentos de Trabajo (working papers) 0199, Department of Economics - dECON.
    5. Vannetelbosch, Vincent J., 1996. "Testing between alternative wage-employment bargaining models using Belgian aggregate data," Labour Economics, Elsevier, vol. 3(1), pages 43-64, August.
    6. Vlassis, Minas, 1996. "Endogenous wage-bargaining institutions in oligopolistic industries," UC3M Working papers. Economics 6014, Universidad Carlos III de Madrid. Departamento de Economía.
    7. 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.
    8. Bárcena Ruiz, Juan Carlos & Campo Corredera, María Luz, 2003. "Timing of Wage Setting when Firms Invest in R&D," IKERLANAK 1134-8984, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    9. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
    10. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2000. "The Effect of Unions on Employment: Evidence from an Unnatural Experiment in Uruguay," NBER Working Papers 7501, National Bureau of Economic Research, Inc.
    11. Adriana Cassoni & Steven G. Allen & Gaston J. Labadie, 2004. "Unions and Employment in Uruguay," NBER Chapters, in: Law and Employment: Lessons from Latin America and the Caribbean, pages 435-496, National Bureau of Economic Research, Inc.
    12. Marco Guerrazzi, 2021. "Wage bargaining as an optimal control problem: a dynamic version of the efficient bargaining model," Decisions in Economics and Finance, Springer;Associazione per la Matematica, vol. 44(1), pages 359-374, June.
    13. Falch, Torberg, 2001. "Collective bargaining in the public sector and the role of budget determination," European Journal of Political Economy, Elsevier, vol. 17(1), pages 75-99, March.
    14. Torberg Falch, 2004. "Wage Bargaining and Employer Objectives," Manchester School, University of Manchester, vol. 72(4), pages 515-534, July.
    15. M. Correa-López, 2006. "A model of unionized oligopoly in general equilibrium," Economics Discussion Paper Series 0605, Economics, The University of Manchester.
    16. Wöhlbier, Florian, 2002. "Subsidising Education with Unionised Labour Markets," Discussion Papers in Economics 7, University of Munich, Department of Economics.
    17. Chica Páez, Yolanda & Espinosa Alejos, María Paz, 2005. "Union Formation and Bargaining Rules in the Labor Market," DFAEII Working Papers 1988-088X, University of the Basque Country - Department of Foundations of Economic Analysis II.
    18. António Brandão & Joana Pinho, 2018. "Productivity Shocks in a Union‐Duopoly Model," Manchester School, University of Manchester, vol. 86(6), pages 722-756, December.
    19. Petrakis, Emmanuel & Vlassis, Minas, 2000. "Endogenous scope of bargaining in a union-oligopoly model: when will firms and unions bargain over employment?," Labour Economics, Elsevier, vol. 7(3), pages 261-281, May.
    20. Hirsch, Barry T. & Prasad, Kislaya, 1995. "Wage-employment determination and a union tax on capital: Can theory and evidence be reconciled?," Economics Letters, Elsevier, vol. 48(1), pages 61-71, April.

    More about this item

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ude:wpaper:1096. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Andrea Doneschi or the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/derauuy.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.