This book tackles the difficult subject of wage determination in the labor markets of highly unionized and concentrated industries where the standard models of competition, monopoly, and monopolistic competition do not apply. It attempts to bridge the gap between untested, abstract bargaining models and empirical studies that relate wages to "bargaining variables" without the benefit of formal theory. To do this, the study derives a wage equation from a bargaining model and then tests this equation on data for manufacturing industries in the United States, drawing conclusions that have important implications for income distribution and for the analysis of union-nonunion wage differentials.
The study presents a survey of bargaining theories, selects one that is most applicable—Nash's theory of bargaining—and from it constructs a model of the firm under bilateral monopoly (the situation in which one employer faces one union and both are price setters rather than price takers). Assumptions are made concerning the product demand curve, production function, capital supply, supply of union members, and the utility functions of the employer and the union. These assumptions plus two hypotheses from Nash's theory determine the wage rate, employment, capital stock, output, price and profits under bilateral monopoly. The comparative statics of this model are examined.
The bargaining wage equation derived from the Nash bilateral monopoly model is then tested on data for several manufacturing industries. Variable construction is discussed, and results of estimation and tests are reported. For example, this wage equation can be interpreted as a Phillips curve to which "bargaining variables" have been added. When estimates of the wage equation were compared to estimates of a simple Phillips curve without these bargaining variables, the equation explained the quarterly movement of average hourly earnings in the test industries better than the simple Phillips curve, i.e., bargaining variables that were carefully derived from a formal theory of bargaining significantly reduced unexplained variance.
Finally, the book provides a much-needed theoretical basis for examining the influence of product market forces on wages and for analyzing union-nonunion relative wages.
Demographic realities will soon force developed countries to find ways to pay for longer retirements for more people. In Pension Strategies in Europe and the United States, leading economists analyze topical issues in pension policy, with a focus on raising the retirement age, increasing retirement savings, and the political sustainability of reforms that will accomplish these goals. After a substantive and wide-ranging introduction by the editors that weaves together the demographic and economic strands of the story, the chapters present cutting-edge research, offering both theoretical and empirical analyses. Contributors examine such topics as the reform of key structural features of existing pay-as-you-go (PAYG) pension systems, analyzing how benefits should vary with the age of retirement, labor supply elasticity after France’s 1993 pension reform, and fiscal response to a demographic shock; the feasibility of PAYG reforms in the United States and the competition among state pension systems that results from labor mobility in Europe; and private, funded systems (increasingly perceived as necessary adjuncts to PAYG systems) in the UK, the US, and the Netherlands, and in terms of individual portfolio management. The editors conclude the volume with a study of recent German and UK reforms and their effects on personal savings.ContributorsTheodore C. Bergstrom, A. Lans Bovenberg, Antoine Bozio, Woojen Chung, Juan C. Conesa, Gabrielle Demange, Richard Disney, Carl Emmerson, Robert Fenge, Luisa Fuster, Carlos Garriga, Christian Gollier, John L. Hartman, Ayse Imrohoroglu, Selahattin Imrohoroglu, Thijs Knaap, Georges de Ménil, Pierre Pestieau, Eytan Sheshinski, Matthew WakefieldRobert Fenge is Senior Research Fellow at the Ifo Institute for Economic Research and Assistant Professor of Economics at the University of Munich. Georges de Ménil is Professor of Economics at École des Hautes Études en Sciences Sociales (EHESS), Paris. Pierre Pestieau is Professor of Economics at the University of Liège. Fenge and Pestieau are coauthors of Social Security and Early Retirement (MIT Press, 2005).