Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/253365 
Year of Publication: 
2022
Series/Report no.: 
GLO Discussion Paper No. 1084
Publisher: 
Global Labor Organization (GLO), Essen
Abstract: 
This paper compares the welfare outcomes obtained under alternative unionization regimes (decentralized vs. centralized wage setting) in a duopoly market, in which shareholders delegate strategic decisions to biased (overconfident or underconfident) managers. In such a framework, the common tenet that consumer surplus and overall welfare are always higher under decentralized wage setting is completely overturned. Indeed, since in the presence of centralized unionization (industry-wide union) firms' shareholders always prefer to hire more aggressive or less conservative managers, output (consumer surplus) and overall welfare are larger in a centralized wage setting structure. This result holds true independently of the degree of product differentiation and the weight attached by unions to wages with respect to employment. Moreover, it also proves to be largely robust relative to the competition regime (quantity or price) in the product market.
Subjects: 
unionization structure
strategic delegation
biased managers
social welfare
JEL: 
J51
L13
L22
Document Type: 
Working Paper

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