Union-Firm Efficient Bargaining and Test of Oligopolistic Conduct

Bughin, Jacques

doi:10.2307/2109477

“…7 Note that for now we assume there is no other variable input factor than labor, so we assume the materials input to be fixed. This does not affect the bargaining outcome as long as the union preferences do not depend on materials (Bughin 1993(Bughin , 1996. However, we also experimented with a different specification such that the profit of the firm that is bargained over equals…”

Section: Empirical Model and Methodologymentioning

confidence: 99%

The effect of globalization on union bargaining and price-cost margins of firms

Abraham

¹

,

Konings

²

,

Vanormelingen

³

2009

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Abstract:In recent years, Europe has witnessed an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states have joined the European Union. This paper analyzes how this process of increased economic integration has affected labor and product markets. To this end, we use a panel of Belgian manufacturing firms to estimate price-cost margins and union bargaining power and show how various measures of globalization affect them.Our findings can be summarized as follows: On average, firms set prices about 30% above marginal costs, but there is substantial variation across sectors, with the lowest mark-up around 19% and the highest around 52%. In addition, we find evidence that unions bargain over both wages and employment. We estimate an index of bargaining power, which reflects the fraction of profits that is passed on to workers into higher wages. Depending on the sector, this fraction varies between 6% and 18% and it increases with the markups of firms. Finally, we find that globalization puts pressure on both markups and union bargaining power, especially when there is increased competition from the low wage countries. This suggests that increased globalization is associated with a moderation of wage claims in unionized countries, which should be associated with positive effects on employment.

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“…This does not affect the bargaining outcome as long as the union preferences do not depend on materials (Bughin 1993(Bughin , 1996. However, we also experimented with a different specification such that the profit of the firm that is bargained over equals…”

Section: Empirical Model and Methodologymentioning

confidence: 99%

The Effect of Globalization on Union Bargaining and Price-Cost Margins of Firms

Abraham

¹

,

Konings

²

,

Vanormelingen

³

2007

View full text Add to dashboard Cite

Abstract:In recent years, Europe has witnessed an accelerated process of economic integration. Trade barriers were removed, the euro was introduced and ten new member states have joined the European Union. This paper analyzes how this process of increased economic integration has affected labor and product markets. To this end, we use a panel of Belgian manufacturing firms to estimate price-cost margins and union bargaining power and show how various measures of globalization affect them.Our findings can be summarized as follows: On average, firms set prices about 30% above marginal costs, but there is substantial variation across sectors, with the lowest mark-up around 19% and the highest around 52%. In addition, we find evidence that unions bargain over both wages and employment. We estimate an index of bargaining power, which reflects the fraction of profits that is passed on to workers into higher wages. Depending on the sector, this fraction varies between 6% and 18% and it increases with the markups of firms. Finally, we find that globalization puts pressure on both markups and union bargaining power, especially when there is increased competition from the low wage countries. This suggests that increased globalization is associated with a moderation of wage claims in unionized countries, which should be associated with positive effects on employment.

show abstract

“…Some papers have relaxed that assumption. Bughin (1991Bughin ( , 1993Bughin ( and 1996 analyzed the relationship between labour markets institutions, particularly trade unions, and product market power. Later, Crépon et al (1999) extended the Hall approach to estimate markups considering an efficient bargaining model between firms and unions based on MacDonald and Solow (1981).…”

Section: A Background Literaturementioning

confidence: 99%