No. 8/2004
WAGE BARGAINING AND MONOPSONY
Torberg Falch
Bjarne Strøm
Abstract:
This paper identifies three possible outcomes of higher relative firm
bargaining power in a unionized firm facing an upward sloping labor supply
curve. The conventional regime with reduced wage and higher employment
corresponds to firm bargaining power below a certain critical value. A
supply constrained regime where increased firm bargaining power reduces
both wages and employment occurs when the bargaining power is above another
critical level. A novel result is that we identify a third regime, with
firm bargaining power between these critical levels, where changes in
relative bargaining power does not affect wages and employment.
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