The trade-off between precommitment and flexibility in trade union wage setting

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Title: The trade-off between precommitment and flexibility in trade union wage setting
Authors: Anderson, Simon P.
Devereux, Michael B.
Permanent link: http://hdl.handle.net/10197/1476
Date: 1990
Abstract: This paper examines two types of contract structures in a model where a trade union supplies labor to an industry, and sets the wage to maximize welfare. Firms' investment is endogenous, and the industry price is stochastic. Under short-term contracts, the union sets the wage after the firms' investment is in place, but also after the industry price is known. Under long- term contracts, the wage is chosen before investment and before the industry price is known. With short-term contracts the union has the benefit of ex-post wage flexibility, while under long-term contracts the union has the benefit of advance wage commitment which may be an important determinant of contract structure. The trade-off is examined in detail.
Funding Details: Social Sciences and Humanities Research Council of Canada
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Subject LCSH: Labor unions
wages
Labor contract
Labor market--Econometric models
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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