Product Market Integration, Wage Bargaining and Strike Activity (original) (raw)
2001
We develop a spatial two-country model of wage determination with private information in unionized imperfectly competitive industries. We investigage the effects of separated product markets opening up for competition as well as of further market integration on the negotiated wage and the strike activity. We show that, when product markets are separated, the wage level and the strike activity are decreasing with the transportation cost and the home market size. However, when markets are integrated, wages and strikes are now increasing with the transportation cost. Finally, we find that the opening of markets for competition has an ambiguous impact on both the negotiated wage and the strike activity.
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Product market competition and unionized wage
2010
Considering a move from monopoly to duopoly, Bastos et al. ("Open shop unions and product market competition", 2010, Canadian Journal of Economics) provides open-shop union, where the union density is less than one, as a theoretical reason for the evidence of a positive relationship between product market competition and unionized wage. We show that their theoretical result is very much sensitive to the assumption of initial monopoly. Using the right-to-manage-model of labor union and generalizing their work with multiple unionized and non-unionized firms, we show that if there are at least two firms initially, higher product market competition reduces unionized wage, irrespective of the union density, bargaining power of the union and the union's preference for wage and employment. We then provide a simple reason for the unionized wage increasing effect of product market competition based on external economies of scale.
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