Micro foundations and macro practice of centralized industrial relations

. Using Mancur Olson's logic of collective action it is shown that high levels of unionization in the labour market are not necessarily as harmful as liberalists believe, and centralization of industrial relations is not necessarily as useful as corporatists suppose. High levels of unionization are harmful especially in decentralized systems of industrial relations. Centralized industrial relations are a useful way of solving problems of collective action especially in highly unionized labour markets. In special conditions centralized industrial relations can be justified with a micro level theory of rational social action. The micro foundations of centralized industrial relations seem to be compatible with the micro foundations of neo‐classical economic theory. Therefore, we should no longer see liberal‐pluralism and corporatism as competing theories, but rather as complementary sub‐theories of a more general economic and political theory. In empirical analyses hypotheses are tested using regression analyses with interaction terms and cross‐national data on inflation and unemployment in 18 OECD‐countries.