A Competitive Theory of Monopoly Unionism

Abstract

This paper sets up a microeconomic theory of labor unions.It discusses their formation and goals, their hierarchical structure, and the nature of rent distribution.The theory provides predictions for the probability that an industry or occupation will be unionized, the proportion of that industry that will be unionized, and observed wage differentials within that industry.It discusses the way that those values change in response to changes in the supply of labor, demand for labor, cost of organizing the union, and cost of defeating the union.Institutions such as featherbedding, fringe benefits, and seniority are rationalized in this framework.The model is consistent with competitive factor and product markets.

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