Dynamic Wage-Employment Bargaining with Employment Adjustment Costs

Abstract

This paper looks at the consequences of introducing employment adjustment costs into two standard models of trade unions--the right-to-manage model and the efficient-bargain model. The authors look at how unions affect both the speed of adjustment to equilibrium and the long-run equilibrium. They examine the consequences of the model for the estimation of dynamic labor demand equations and for the testing of trade union models. Copyright 1989 by Royal Economic Society.