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A Dynamic Model of Union Behaviour. The Role of an Endogenous Outside Option and Bargaining Centralisation

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  • Schirwitz, Beate
  • Dittrich, Marcus

Abstract

We analyse the role of bargaining centralisation when both the union's outside option and union membership are endogenous and considered in a dynamic framework. A dynamic two-sector model is developed where the wage rate in the first sector is either set by a monopoly union or is the result of efficient bargaining between union and firm. The union's outside option is employment in the second, competitive sector. We extend the dynamic analysis by modelling the outside option as endogenous and show that dynamic models may also overstate employment distortions in this case if bargaining is conducted on a highly centralised stage. Additionally, we offer reflexions along the optimisation process in different scenarios and a comparative static analysis, thus presenting some new general insights into the topic.

Suggested Citation

  • Schirwitz, Beate & Dittrich, Marcus, 2006. "A Dynamic Model of Union Behaviour. The Role of an Endogenous Outside Option and Bargaining Centralisation," Dresden Discussion Paper Series in Economics 07/06, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    • Handle: RePEc:zbw:tuddps:0706
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    References listed on IDEAS

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    Cited by:

    1. Dittrich, Marcus, 2006. "Welfare Effects of Union Bargaining Centralisation in a Two-Sector Economy," MPRA Paper 11, University Library of Munich, Germany, revised Sep 2006.

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    More about this item

    Keywords

    Dynamic wage bargaining; unions; dual labour market; endogenous outside option; endogenous membership;
    All these keywords.

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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