Insiders and Outsiders in Union Models

Abstract

This paper examines the importance of distinguishing between 'insiders' and 'outsiders' in models of union-firm bargaining. In general, insiders are those workers already established in the firm, while outsiders are either unemployed or working in temporary, low-security jobs. Modifying traditional union models to take account of this distinction is straightforward in one-period models, where the union is assumed to be indifferent to the welfare of outsiders, but is much more complicated in dynamic models. Some of the predictions of insider-outsider models concerning wage rigidity and unemployment are not robust. However, the prediction that wages will depend on both insider and outsider forces is robust and appears to be supported by the empirical evidence. Furthermore, evidence from the U.S. suggests that insider power should not be viewed as a purely union phenomenon.

Firm Ownership and Rent Sharing

“…The economics literature on trade unions suggests di¤erent interpretations of the degree of wage orientation. One standard interpretation is that represents the relative power of insiders versus outsiders, where the former are more interested in pushing for higher wages than the latter (see, e.g., Sanfey, 1995). Another interpretation, following Pemberton (1988), is that represents the bargaining power of union members It is not easy to see how either of these standard interpretations of and should be a¤ected by …rm ownership.…”

Wage Adjustment and Employment Persistency

“…In the simple model the former effect dominates, but in general the theoretical relationship is ambiguous [cf. the discussion by Sanfey (1995)]. …”

“…Numerous studies have included lagged employment in wage equations to test this property [see Sanfey (1995) for references]. One problem with this procedure is that lagged employment often is included in models that in other respects are not consistent with the persistency hypothesis.…”

“…It is well-known that the insider-outsider model in general does not imply employment persistency. See Sanfey (1995) for a recent survey of the theoretical and empirical literature on the insider-outsider model.…”

Friday May Never be the Same Again: Some Results on Work Sharing from Union–Firm Bargaining Models

“…11 What little evidence there is suggests that ' lies between one and three. See Sanfey (1995) for an assessment.…”