Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/170532
Authors: 
García Martínez, José Ramón
Sorolla i Amat, Valeri
Year of Publication: 
2017
Series/Report no.: 
Economics Discussion Papers 2017-87
Abstract: 
In a standard Diamond-Mortensen-Pissarides labour market with frictions, the authors seek to determine when there is more employment with individual wage bargaining than with collective wage bargaining, using a wage equation generated by the standard total surplus sharing rule. Using a Cobb-Douglas production function (AL, < 1), they find that if the bargaining power of the individual is high compared to the bargaining power of the union, there is more unemployment with individual wage setting and vice versa. When the individual worker and the union have the same bargaining power, if the cost of opening a vacancy is sufficiently high, there is more unemployment with individual wage setting. Finally, for a constant marginal product of labour production function AL, when the individual worker and the union have the same bargaining power, individual bargaining produces more unemployment.
Subjects: 
Matching Frictions
Unemployment
Individual and Collective Wage Setting
JEL: 
E24
O41
Creative Commons License: 
http://creativecommons.org/licenses/by/4.0/
Document Type: 
Working Paper

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