Minas Vlassis | University of Crete (original) (raw)

Papers by Minas Vlassis

This paper develops a framework of endogenous formation of wage-bargaining institutions regarding... more This paper develops a framework of endogenous formation of wage-bargaining institutions regarding the level at which unions and firms negotiate in industries with market power. We show that economic factors, such as asymmetries in productive efficiency and bargaining power, are responsible for the en~ ',gence of various degrees of bargaining centralization. An all unionefficient firms majorit) coalition typically establishes an extra stage of wage negotiations at the sectorial level. If, for given bargaining powers, the productivity differences are sufficiently high, wage negotiations are also conducted at firm-level. Otherwise, the (minimum) wage bargain struck at the sectorial level is simply confirmed by both, firms and unions. This is a case of complete bargaining centralization. If, however, technological and bargaining power asymmetries cancel out, wage negotiations are conducted only at the firm level (decentralized bargaining).

In a unionized Cournot duopoly under decentralized wage bargaining regime, we analyzed undeclared... more In a unionized Cournot duopoly under decentralized wage bargaining regime, we analyzed undeclared labour in a matrix game. We reveal the opportunity cost between taxation and contributions for social insurance that firms and unions face, while we examine all relevant possible unilateral deviations from firms and unions. Our research concludes in three different possible equilibria that all three of them – under certain circumstances – may constitute a Nash SPE. Further, we conclude that if both firms declare their labour, then the incentive for firm’s deviation will arise if the bargaining power of unions is low enough (b < bcr1), while unions will silently consent to undeclared labour if the rate for social insurance’s contributions is great enough (k > kcr1). If both firms practice undeclared labour, then there can be none critical value that will alter firms’ policy to declared labour; thus, in this case, unions will consent to undeclared labour only if k is low enough (k &...

In a union-oligopoly context, we interpret the optimal equilibria may arise from the implementati... more In a union-oligopoly context, we interpret the optimal equilibria may arise from the implementation of any possible policies of a benevolent social planner in the labour market. The applied policies may contradict or correspond with unions’ and firms’ objectives, while in other cases institutional arrangements of labour market appear to be inefficient to induce or deter FDI and thus social planner must search for alternative strategic devices. Given the complexity of the model, which must be solved computationally to obtain results, there are several outcomes depending on the values of the parameters.

In contrast with previous studies we assume no ex-ante commitment over the ─price or quantity─ ty... more In contrast with previous studies we assume no ex-ante commitment over the ─price or quantity─ type of contract which downstream firms will independently offer consumers in a two-tier oligopoly. Under competing vertical chains, we propose that the downstream mode of competition which in equilibrium emerges is the outcome of independent implicit agreements, between each downstream firm and its exclusive input supplier, in each vertical chain. Our findings suggest that input suppliers may thus act as commitment devices sufficient to endogenously sustain the quantity (Cournot) mode of competition. JEL Classification: D43; L13; L42

Annals of Economics and Statistics

In a union-oligopoly static framework we study the role of unions regarding the possibility and t... more In a union-oligopoly static framework we study the role of unions regarding the possibility and the effects of endogenous cartel formation. Given that firms independently adjust their own quantities, we show that, if union members are not sufficiently risk-averse and firms' products are sufficiently close substitutes, then collusion among firms may emerge in equilibrium, and that − in contrast to conventional wisdom − cartel formation proves to be a welfare improving market arrangement. Quite remarkably, the latter gain in social welfare materializes at the cost of union rents despite it is the union's presence which effectively sustains collusion.

Journal of Industrial and Business Economics

In the context of a two-period unionized mixed oligopoly, we propose that—due to the public secto... more In the context of a two-period unionized mixed oligopoly, we propose that—due to the public sector’s role in the market—public–private wage differentials in favor of the public sector employees emerge over the business cycle, under either an asymmetric or a symmetric firing restrictions regime across the public and the private sector. Under the former regime, firing costs are higher than (equal to) hiring costs in the public (private) sector, while under the latter regime firing/hiring costs are equal everywhere. The structure of the emerging product and labor market equilibria, as well as the volume and the distribution of welfare, are however quite different under the two regimes. In contrast to conventional beliefs, the asymmetric regime, as compared to the symmetric regime, entails higher aggregate output and employment over the business cycle. Moreover, a typical measure of social welfare dictates that the asymmetric regime should be sustained unless demand conditions significantly deteriorate during the recession.

Economics Letters

Abstract This paper studies the phenomenon of undeclared labour. In a unionized duopoly with dece... more Abstract This paper studies the phenomenon of undeclared labour. In a unionized duopoly with decentralized wage setting and proportional taxation we show that a trade-off exists for employers between contributing to social insurance for their employees and incurring taxes on labour. The configuration among the tax and social insurance contribution rates may thus generate undeclared labour in equilibrium. Nonetheless, those rates can be handled by a social planner so as to tackle undeclared labour at no cost to social welfare, but with welfare distributive consequences.

Investigaciones Economicas, 1999

Review of Industrial Organization, 2016

In the context of union-duopoly decentralized bargaining, we argue that, prior to the realization... more In the context of union-duopoly decentralized bargaining, we argue that, prior to the realization of any employment and production plans, firms and unions may collectively decide about their bargaining agenda. That is, whether they will subsequently negotiate about only wages (“Right-to-Manage”) or about both wages and employment (“Efficient Bargains”). We show that under price competition in the product market the equilibrium bargaining agendas always involve only wages. Under quantity competition, however, and provided that the union bargaining power is low enough, one firm/union pair agrees on Efficient Bargains while the other pair agrees on Right-to-Manage. Thus, if sufficient product differentiation among firms exists, then social welfare can be higher under quantity competition than under price competition; the role of unions is critical for this result.

In a union-oligopoly framework with differentiated products, this paper endogenizes the mode of p... more In a union-oligopoly framework with differentiated products, this paper endogenizes the mode of product market competition by exploring its strategic role on firms' incentives for collusion. It is shown that in a one-shot game setup, provided that union members are endowed with risk-neutral and monopoly bargaining power during the negotiations, cartel formation is an unavoidable equilibrium in the product market, hence industry's outcomes and market participants surpluses/rents equal to that of collusive play. The cartel is proved to be welfare improving, if and only if products' substitutability is sufficiently high under Cournot competition. Moreover and given firms' competition, we conclude that among modes of competition, under Bertrand competition Social Welfare is higher than Cournot, while under a Mix of Strategies it lies in-between. Consequently, it is welfare improving to be a benevolent policy maker that deters cartel formation and gives firms' incentive for Bertrand competition.

In a unionized Cournot duopoly under decentralized wage bargaining regime, we analyzed undeclared... more In a unionized Cournot duopoly under decentralized wage bargaining regime, we analyzed undeclared labour in a matrix game. We reveal the opportunity cost between taxation and contributions for social insurance that firms and unions face, while we examine all relevant possible unilateral deviations from firms and unions. Our research concludes in three different possible equilibria that all three of themunder certain circumstances-may constitute a Nash SPE. Further, we conclude that if both firms declare their labour, then the incentive for firm's deviation will arise if the bargaining power of unions is low enough (b < b cr1), while unions will silently consent to undeclared labour if the rate for social insurance's contributions is great enough (k > k cr1).

In a duopoly where firms are competing by adjusting their quantities and the wages are exogenousl... more In a duopoly where firms are competing by adjusting their quantities and the wages are exogenously determined, we analyze the undeclared labour phenomenon and its side effects in product market. Our analysis focuses on the opportunity cost between the taxation and the contributions for social security. The findings of our analysis indicate that there is a strong relationship between the tax rate, the rate of contributions for social insurance and undeclared labour. It is furthermore determined that any combination of tax (t) / contributions (k) rates under the curve, will lead firms to practice undeclared labour, in order to avoid paying contributions for social security, since the alternative choice is more costly.

Undeclared labour constitutes a complex phenomenon that has not yet been analyzed within I/O fram... more Undeclared labour constitutes a complex phenomenon that has not yet been analyzed within I/O framework. In a unionized duopoly under decentralized wage bargaining context, we reveal the opportunity cost that exists between the taxation and the contributions for social insurance. Comparing to a benchmarking state where no undeclared labour exist, our findings indicate that if the tax rate is low enough, the rate of undeclared labour that maximizes firms' profit will yield greater clearing wages, greater output and thus employment, greater consumer surplus and lower price. Furthermore, in contrast to common knowledge, we showed that under certain circumstances, undeclared labour may increase firms' profits and unions' utility, but it may also increase public revenues and social welfare. Finally, we propose a Pareto optimal tax rate for the case that firms practice undeclared labour. The proposed tax rate will render greater values in all market's magnitudes (wages, profits, quantities, consumer surplus, and social welfare). However, this policy proves that this specific policy lacks financing.

In a union-oligopoly context, we interpret the optimal equilibria may arise from the implementati... more In a union-oligopoly context, we interpret the optimal equilibria may arise from the implementation of any possible policies of a benevolent social planner in the labour market. The applied policies may contradict or correspond with unions' and firms' objectives, while in other cases institutional arrangements of labour market appear to be inefficient to induce or deter FDI and thus social planner must search for alternative strategic devices. Given the complexity of the model, which must be solved computationally to obtain results, there are several outcomes depending on the values of the parameters.

Annals of Economics and Statistics

Journal of Industrial and Business Economics

Economics Letters

Investigaciones Economicas, 1999

Review of Industrial Organization, 2016

In a unionized Cournot duopoly under decentralized wage bargaining regime, we analyzed undeclared... more In a unionized Cournot duopoly under decentralized wage bargaining regime, we analyzed undeclared labour in a matrix game. We reveal the opportunity cost between taxation and contributions for social insurance that firms and unions face, while we examine all relevant possible unilateral deviations from firms and unions. Our research concludes in three different possible equilibria that all three of themunder certain circumstances-may constitute a Nash SPE. Further, we conclude that if both firms declare their labour, then the incentive for firm's deviation will arise if the bargaining power of unions is low enough (b < b cr1), while unions will silently consent to undeclared labour if the rate for social insurance's contributions is great enough (k > k cr1).

In a union-oligopoly context, we interpret the optimal equilibria may arise from the implementati... more In a union-oligopoly context, we interpret the optimal equilibria may arise from the implementation of any possible policies of a benevolent social planner in the labour market. The applied policies may contradict or correspond with unions' and firms' objectives, while in other cases institutional arrangements of labour market appear to be inefficient to induce or deter FDI and thus social planner must search for alternative strategic devices. Given the complexity of the model, which must be solved computationally to obtain results, there are several outcomes depending on the values of the parameters.