Title
Efficiency wages, unemployment benefits and union : firm wage bargaining : the issue of the choice of the outside optionEfficiency wages, unemployment benefits and union : firm wage bargaining : the issue of the choice of the outside option
Author
Faculty/Department
Faculty of Applied Economics
Research group
Economics
Faculteit Toegepaste Economische Wetenschappen
Management
Publication type
article
Publication
Fairfax, Va,
Subject
Economics
Source (journal)
Journal of labor research. - Fairfax, Va, 1980, currens
Volume/pages
32(2011):1, p. 75-86
ISSN
0195-3613
1936-4768
ISI
000287860400005
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Affiliation
University of Antwerp
Abstract
This paper points out that theremay be a logical consistency issue in choosing the reference wage in efficiency wage models.We have shown that defining the outside option in the efficiencywage logic as themarket-clearing wage solves this difficulty, and is justifiable in terms of the assumed behaviour of workers and employers. The model that we examine confirms earlier findings of reinforcing effects between union-firm bargaining and efficiency wages. However, if union preferences vary between wages and employment, Summers reinforcing effect is no longer present for each value of the parameter describing these preferences. Above a certain threshold value of union preferences for employment, the two mechanisms do not reinforce each other anymore.
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