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Unions in a frictional labor market
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies. University of Gothenburg, Sweden; NBER, United States; CEPR, United Kingdom.
Number of Authors: 2
2016 (English)In: Journal of Monetary Economics, ISSN 0304-3932, E-ISSN 1873-1295, Vol. 80, 35-50 p.Article in journal (Refereed) Published
Abstract [en]

A labor market with search and matching frictions, where wage setting is controlled by a monopoly union that follows a norm of wage solidarity, is found vulnerable to substantial distortions associated with holdup. With full commitment to future wages, the union achieves efficient hiring in the long run, but hikes up wages in the short run to appropriate rents from firms. Without commitment, in a Markov-perfect equilibrium, hiring is too low both in the short and the long run. The quantitative impact is demonstrated in an extended model with partial union coverage and multiperiod union contracting.

Place, publisher, year, edition, pages
2016. Vol. 80, 35-50 p.
Keyword [en]
Labor unions, Frictional labor markets, Time inconsistency, Limited commitment, Long-term wage contracts
National Category
Economics and Business
URN: urn:nbn:se:su:diva-134179DOI: 10.1016/j.jmoneco.2016.04.006ISI: 000381951100003OAI: diva2:1040700
Available from: 2016-10-28 Created: 2016-10-03 Last updated: 2016-10-28Bibliographically approved

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Krusell, Per
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