Insider Power in Wage Determination

47 Pages Posted: 10 Oct 2007 Last revised: 14 Apr 2022

See all articles by David G. Blanchflower

David G. Blanchflower

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER); University of Stirling - Department of Economics

Andrew J. Oswald

University of Warwick - Department of Economics; IZA Institute of Labor Economics

Mario Garrett

San Diego State University; London School of Economics & Political Science (LSE)

Date Written: November 1989

Abstract

The paper argues that wage determination is best seen as a kind of rent sharing in which workers' bargaining power is influenced by conditions in the external labour market. It uses British establishment data from 1984 to show that pay depends upon a blend of insider pressure (including the employer's financial performance and oligopolistic position) and outsider pressure (including external wages and unemployment). Lester's feasible 'range' of wages appears typically to be between 8% and 22% of pay. Estimates of the unemployment elasticity of the wage lie in a narrow band around -0.1.

Suggested Citation

Blanchflower, David G. and Oswald, Andrew J. and Garrett, Mario, Insider Power in Wage Determination (November 1989). NBER Working Paper No. w3179, Available at SSRN: https://ssrn.com/abstract=467630

David G. Blanchflower (Contact Author)

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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University of Stirling - Department of Economics ( email )

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Andrew J. Oswald

University of Warwick - Department of Economics ( email )

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IZA Institute of Labor Economics

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Mario Garrett

San Diego State University ( email )

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United States
1 619 594 2818 (Phone)

HOME PAGE: http://www.mariogarrett.com

London School of Economics & Political Science (LSE)

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