An Alternative Economic Analysis of the Regulation of Unions and Collective Bargaining

Abstract

In this book chapter, I attempt to provide an economic analysis of the positive influences of unions on efficiency, equity and the governance of society, as well as an economic rationale for the regulation of collective bargaining to promote equity in bargaining power and industrial peace. This chapter draws on my previous work on the bargaining model of unions and collective bargaining, as well as work from the law and society literature and behavioral psychology. My analysis examines a variety of possible benefits of unions to society including: the redistribution of product market rents from employers to employees, increases in productivity due to employee organization, and the efficient evolution of the law and social rules with the transformation of workers from one-shot players to repeat-players through organization. The treatment of the costs of collective bargaining as positional externalities within the context of a dilemma game provides a rationale for government regulation to encourage cooperation between the parties to collective negotiations.

Keywords: Law and Economics, Labor, Unions, Regulation

JEL Classification: A14, J58, K31