Insider bargaining power, starting wages and involuntary unemployment

Nils Gottfries, Tomas Sjöström

Research output: Contribution to journalArticlepeer-review

9 Scopus citations

Abstract

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.

Original languageEnglish (US)
Pages (from-to)669-688
Number of pages20
JournalScandinavian Journal of Economics
Volume102
Issue number4
DOIs
StatePublished - 2000
Externally publishedYes

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Bargain
  • Hiring
  • Seniority
  • Severance payment
  • Starting wage

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