Article ID Journal Published Year Pages File Type
972471 Labour Economics 2007 21 Pages PDF
Abstract

This article presents a game-theoretical model of union organization that highlights the role played by efficiency and asymmetric information as determinants of unionization and questions commonly-held assumptions about the effect of firm profitability on unionization decisions. In the model, employers set wages taking into account the effect of their choices on workers' incentives to unionize. As a result of employers' strategic wage setting, collective bargaining emerges in equilibrium only if it increases surplus or if there is asymmetric information about the consequences of unionization. While unionization is usually assumed to be more likely in more profitable firms, the model shows that the probability of unionization will be higher in firms with lower rents. It also shows that the union wage premium and unionization will tend to be negatively correlated.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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