Strikes and Wages: a Test of a Signalling Model

68 Pages Posted: 4 Jul 2004

See all articles by David Card

David Card

University of California, Berkeley - Department of Economics; Institute for the Study of Labor (IZA); National Bureau of Economic Research (NBER)

Date Written: April 1988

Abstract

This paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the level of profitability of the firm. The implications of the model are then tested using data on wage outcomes, strike probabilities, and strike durations for a large sample of collective bargaining agreements. Negotiated wages are found to depend negatively on regional unemployment rates and positively on industry-specific selling prices. Contrary to the basic premise of the model, however, there is no evidence of a systematic relation between wages and strike outcomes. Increases in unemployment are found to decrease the probability of strikes, while increases in industry selling prices increase the probability of disputes. Strike durations are only weakly related to unemployment and industry prices, but are negatively correlated with industry output.

Suggested Citation

Card, David E., Strikes and Wages: a Test of a Signalling Model (April 1988). NBER Working Paper No. w2550. Available at SSRN: https://ssrn.com/abstract=425576

David E. Card (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Institute for the Study of Labor (IZA)

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Germany

National Bureau of Economic Research (NBER)

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