Social preferences in wage bargaining: A corporatist approach

The starting point for this paper is the stress laid by a branch of literature about corporatist systems on the role of cooperation and consensus in wage bargaining for reaching better economic performances. In order to model a cooperative regime within the classical framework where the monopoly union controls wages and the firm controls employment, we introduce social preferences with some degree of other-regarding concern (ORC), such that each agent's objective function is a linear combination of its own and the other's welfare. The results show that under specific conditions depending on the degree of ORC, an employment level higher than in the selfish case as well as wage moderation can be obtained.