Publication: The economics of union organization : efficiency, information and profitability
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2007-10
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Elsevier
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Abstract
This article presents a game theoretical model of union organization that highlights the role played by
efficiency and asymmetric information as determinants of unionization and questions commonly held
assumptions about the effect of firm profitability on unionization decisions. In the model, employers set
wages taking into account the effect of their choices on workers' incentives to unionize. As a result of
employers' strategic wage setting, collective bargaining emerges in equilibrium only if it increases surplus
or if there is asymmetric information about the consequences of unionization. While unionization is usually
assumed to be more likely in more profitable firms, the model shows that the probability of unionization
will be higher in firms with lower rents. It also shows that the union wage premium and unionization will
tend to be negatively correlated.
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Keywords
Unionization, Asymmetric information, Union efficiency, Profitability
Bibliographic citation
Labour economics, 14, 5, oct. 2007, pp. 848-868