On the Foundations of Wage Bargaining

CEPR Discussion Paper Series #1514

Posted: 16 Apr 1997

See all articles by Paola Manzini

Paola Manzini

University of St. Andrews - School of Economics and Finance; Institute for the Study of Labor (IZA)

Dennis J. Snower

University of Kiel - Institute for World Economics (IfW); Institute for the Study of Labor (IZA); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 1996

Abstract

This paper provides strategic foundations for the insight that the bargaining power of employees depends on the firm's labor turnover costs. The analysis shows how these costs determine the firm's degree of substitutability between two sets of wage negotiations: 1) those the firm conducts with its incumbent employees; and 2) the alternative negotiations it could conduct with new job seekers. In this context, labor turnover costs not only influence the negotiators' alternatives to bargaining (i.e., the negotiators' fall-back positions and outside options), they affect the nature of the bargaining process itself. This approach leads to a new theory of wage determination.

JEL Classification: C78, J31, J32

Suggested Citation

Manzini, Paola and Snower, Dennis J., On the Foundations of Wage Bargaining (November 1996). CEPR Discussion Paper Series #1514. Available at SSRN: https://ssrn.com/abstract=3893

Paola Manzini (Contact Author)

University of St. Andrews - School of Economics and Finance ( email )

North St
Saint Andrews, Fife KY16 9AJ
United Kingdom

HOME PAGE: http://www.st-andrews.ac.uk/~pm210/

Institute for the Study of Labor (IZA)

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

Dennis J. Snower

University of Kiel - Institute for World Economics (IfW) ( email )

Duesternbrooker Weg 120
D-24118 Kiel
Germany
+49+431-8814-235 (Phone)

Institute for the Study of Labor (IZA)

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

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Register to save articles to
your library

Register

Paper statistics

Abstract Views
584
PlumX Metrics