Tradeunionstatus,employmenteffectsandwagerigidity.docVIP

ΣΤΟ ΔΟΚΙΜΙΑ ΠΡΟΣ ΤΙΜΗ ΤΟΥ ΚΑΘ. Α. ΛΑΖΑΡΗ, ?κδοση Πανεπιστημ?ου Πειραι?, 2003. TRADE UNION STATUS, EMPLOYMENT EFFECTS AND WAGE RIGIDITY BY S.A. DRAKOPOULOS UNIVERSITY OF ATHENS JANUARY 2002 Abstract The starting point of this paper is the idea that wage settlements are interdependent. This implies that when a status wage is reached the union shifts its entire attention to employment. In order to capture this, the paper constructs a two-part union utility function which changes when the status wage is reached. The paper analyses the significance of such union utility under a monopoly union framework and also under efficient bargains. A general result of the discussion is that large positive shocks are needed to increase employment and this might be seen as an additional explanation of procyclical employment effects. Furthermore, it is shown that there is downward wage rigidity during a high employment period. JEL CLASSIFICATION: J51, E24 Special thanks are due to P. Sloane, J. Skatun, and I. Theodossiou. The usual disclaimer applies I. Introduction The idea that wage settlements are interdependent especially in the unionised sector has been recurring in the union and industrial relations literature. In particular, there are empirical indications that wage settlements in a key sector of the economy determine settlements in other sectors. Moreover, the concept has been used in a number of theoretical frameworks (see for instance Duesenberry,1949; Scitovsky, 1976; Frank, 1984). More recently authors like Oswald (1979, 1986), Gylfason and Lindbeck (1986) Summers (1988), Akerlof and Yellen (1990), Clark and Oswald (1996), Drakopoulos and Theodossiou (1997) have used it more in connection to labour economics. In a Keynesian framework, it is also plausible to connect the status wage with the previous wage level, and/or the rest of the industrys wage settlements. However, the idea of the aspiration wage resulting into two part union utility function has not been giv