Unemployment and the "Labour-Management Conspiracy"
The Economic Journal, Vol. 110, Issue 460, January 2000
Posted: 28 Nov 2000
Abstract
We study a model in which management and a union bargain over a rule that will later determine the level of employment, and over a wage. The government then chooses an output or an employment subsidy. An exogenous natural turnover rate in the unionized sector creates unemployment whenever the union wage exceeds the competitive wage. Government intervention can increase both the equilibrium amount of unemployment and worsen the intersectoral allocation of labour, because of the induced change in the endogenous wage. Unemployment weakens but does not eliminate the possibility of a "labour-management conspiracy."
JEL Classification: J53, J64
Suggested Citation: Suggested Citation