Premium
Corruption, Efficiency Wage and Union Leadership
Author(s) -
Chaudhuri Sarbajit,
Dastidar Krishnendu Ghosh
Publication year - 2014
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/1468-0106.12083
Subject(s) - wage bargaining , efficiency wage , economics , wage , labour economics , collective bargaining , unemployment , wage rate , macroeconomics
This paper develops a model of determination of the unionized wage in the presence of both collective bargaining and an efficiency wage. The efficiency of each worker is positively related to both the wage and the unemployment rate in the economy. The unionized wage is greater than the efficiency wage and the firm finds it profitable to keep the unionized wage as close as possible to the efficiency wage. The union leader who is entrusted with the task of determining the unionized wage charges a bribe from the firm to keep the wage close to this level. The corrupt trade union leader and the management of the firm play a two‐stage N ash bargaining game from where the equilibrium unionized wage and the bribe are determined. The analysis leads to some interesting results which are important for anticorruption policy formulation.