Chapter 19 The economics of strikes

Kennan, John

doi:10.1016/s1573-4463(86)02009-6

Cited by 127 publications

(98 citation statements)

References 47 publications

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“…It is not difficult to show that there are incentive-efficient mechanisms that select d 0 with positive probability if and only if J $ S L /S H (see Kennan (1986)). This condition does not hold in the model considered in this paper.…”

Section: Appendix Amentioning

confidence: 99%

Private Information, Wage Bargaining and Employment Fluctuations

Kennan¹

2006

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Shimer (2005) pointed out that although we have a satisfactory theory of why some workers are unemployed at any given time, we don?t know why the number of unemployed workers varies so much over time. The basic Mortensen-Pissarides (1994) model does not generate nearly enough volatility in unemployment, for plausible parameter values. This paper extends the Mortensen-Pissarides model to allow for informational rents. Productivity is subject to publicly observed aggregate shocks, and to idiosyncratic shocks that are seen only by the employer. It is shown that there is a unique equilibrium, provided that the idiosyncratic shocks are not too large. The main result is that small fluctuations in productivity that are privately observed by employers can give rise to a kind of wage stickiness in equilibrium, and the informational rents associated with this stickiness are sufficient to generate relatively large unemployment fluctuations.

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Section: Appendix Amentioning

confidence: 99%

Private Information, Wage Bargaining and Employment Fluctuations

Kennan¹

2006

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“…As a by-product, we show why some strikes may be perfectly rational thus providing an explanation for what Kennan (1986) calls the "Hicks Paradox". Our approach begins with standard Hicksian concession curves modified by Mauro (1982) to account for imperfect information.…”

Section: I3 Model Outline and Predictionsmentioning

confidence: 85%

How Asymmetrically Increasing Joint Strike Costs Need Not Lead to Fewer Strikes

Pantsios

Polachek

2017

Atl Econ J

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in How Asymmetrically Increasing Joint Strike Costs Need Not Lead to Fewer Strikes APrIl 2017Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA research network is committed to the IZA Guiding Principles of Research Integrity. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world's largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. Our key objective is to build bridges between academic research, policymakers and society. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. How Asymmetrically Increasing Joint Strike Costs Need Not Lead to Fewer Strikes *The "joint costs" model states that the incentive to strike is inversely related to the total costs associated with workers' and firms' strike activities. Not only has this model been tested with mixed results, but also the joint costs model is problematic in explaining several stylized facts in the strike literature because higher strike costs do not always yield a lower incidence of strike activity. This paper illustrates how the joint cost model can yield these counterintuitive results. It shows that strike incidence need not decrease when joint strike costs increase. The innovation is to raise union and firm joint strike costs in an asymmetric way. Increasing a particular side's strike costs necessarily decreases its incentive to strike.However, in response, the other side's incentive can increase, since under a number of circumstances it holds out with a higher probability in order to collect the relatively larger expected rents coming about because the other side's implicit threat point decreases. To illustrate this, we model contract negotiations as a simple one-period game. (No need for more complex repeated games such as attrition since our point is only to show as simply as possible why the joint-costs model yields ambiguous results.) We use standard Hicksian concession curves to der...

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“…Starting with Ashenfelter and Johnson (1969) and surveyed in Kennan (1986), a popular model in the analysis of the economics of labour strikes has incorporated the notion that, lacking as much information about firms' profitability as the firms themselves, unions use strikes to sort out the more profitable firms from the less profitable. It is assumed that the strikers make the firms a decreasing sequence of wage offers, knowing that the more profitable firms will want to resolve the strike sooner than the less profitable firms as the former have more to lose in terms of forgone profits.…”

Section: Informational Asymmetrymentioning

confidence: 99%