Collective Bargaining Under Non-Binding Contracts

15 Pages Posted: 21 Feb 2011

See all articles by Sabien Dobbelaere

Sabien Dobbelaere

Vrije Universiteit Amsterdam - Department of Economics; Tinbergen Institute; IZA Institute of Labor Economics

Roland Iwan Luttens

Ghent University - Department of Social Economics

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Abstract

We introduce collective bargaining in a static framework where the firm and its risk-neutral employees negotiate over wages in a non-binding contract setting. Our main result is the equivalence between the non-binding collective equilibrium wage-employment contract and the equilibrium contract under binding risk-neutral efficient bargaining. We also demonstrate that our non-cooperative equilibrium wages and profits coincide with the Owen values of the corresponding cooperative game with the coalitional structure that follows from unionization.

Keywords: collective bargaining, union, firm, bargaining power, non-binding contract

JEL Classification: C71, J51, L20

Suggested Citation

Dobbelaere, Sabien and Luttens, Roland Iwan, Collective Bargaining Under Non-Binding Contracts. IZA Discussion Paper No. 5518. Available at SSRN: https://ssrn.com/abstract=1765684

Sabien Dobbelaere (Contact Author)

Vrije Universiteit Amsterdam - Department of Economics ( email )

De Boelelaan 1105
NL- Amsterdam, NL-1081 HV
Netherlands
0031 20 598 28 74 (Phone)

Tinbergen Institute

Keizersgracht 482
NL- Amsterdam, NL-1017 EG
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
D- Bonn, 53072
Germany

Roland Iwan Luttens

Ghent University - Department of Social Economics ( email )

Hoveniersberg 24
Gent, 9000
Belgium

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