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Insider Bargaining Power, Starting Wages and Involuntary Unemployment
Author(s) -
Gottfries Nils,
Sjostrom Tomas
Publication year - 2000
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00220
Subject(s) - insider , wage , economics , bargaining power , unemployment , efficiency wage , labour economics , incentive , wage bargaining , power (physics) , affect (linguistics) , microeconomics , law , macroeconomics , political science , sociology , physics , quantum mechanics , communication
Recent studies of wage bargaining and unemployment have emphasized the distinction between insiders and outsiders, and that unions act in the interest of insiders. Yet it is typically assumed that insiders and recently hired outsiders are paid the same wage. We consider a model where the starting wage may differ from the insider wage, but incentive constraints associated with turnover affect the form of the contract. We examine under what conditions the starting wage is linked to the insider wage so that increased bargaining power of insiders raises the starting wage and reduces the hiring of outsiders. JEL classification : J 23; J 31; J 33