Abstract
The paper develops a seniority model of union behaviour that attempts to resolve a number of long-standing puzzles in the literature. The model predicts that (i) efficient contracts will lie on the labour demand curve, (ii) there will be negotiations over pay but not employment, (iii) unions will have no direct interest in the elasticity of labour demand, (iv) in certain circumstances there will be extreme wage rigidity, (v) exceptional recessions will produce concession bargaining, and (vi) there will be no ‘shrinking union’ problem. It is also shown that the introduction of layoffs by seniority into implicit contract theory eliminates its famous wage-rigidity theorem. The paper discusses the form of real labour contracts, documents the extent of layoffs by seniority, and reports the results of a survey of the largest British and US trade unions.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
