Centralized Bargaining, Efficiency Wages, and Flexibility

March 1, 1993

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Ramana Ramaswamy, and Bob Rowthorn. Centralized Bargaining, Efficiency Wages, and Flexibility, (USA: International Monetary Fund, 1993) accessed September 19, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The main focus of the “wage bargaining” literature has been on the factors promoting real wage flexibility at the macro level. This paper, in contrast, examines the microeconomic issues of wage bargaining. More specifically, this paper appraises the following questions: (a) what are the conditions under which a firm prefers decentralized to centralized bargaining?, (b) what are the characteristic features of firms which prefer decentralized to centralized bargaining?, and (c) has the proportion of firms which prefer decentralized bargaining increased over time? These questions are examined in an efficiency wage model with insider-outsider features. This paper provides useful theoretical insights for understanding the issues involved in shifting from centralized to decentralized wage bargaining.

Subject: Labor, Real wages, Wage adjustments, Wage bargaining, Wages

Keywords: Centralized bargaining, Efficiency wage, Effort requirement, H. firm, Iso-profit contour, L firm, Low technology firm, Real wages, Wage adjustments, Wage bargaining, Wages, WP

Publication Details

Pages:

32
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1993/025
Stock No:

WPIEA0251993
ISBN:

9781451844191
ISSN:

1018-5941

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