Working Paper: CEPR ID: DP1912
Authors: Damien J. Neven; Larshendrik Roller; Zhentang Zhang
Abstract: In this paper, we specify and estimate a structural model, which links product market competition and union power. The model has a two-stage setting, in which wages are determined through bargaining between management and unions in the first stage, with a price-setting market game to follow in the second stage. Using data for eight European airlines from 1976?94, we provide evidence on price-cost margins and the measurement of market power in a model of rent sharing. In particular, we find that rent sharing reduces firms? profits more than it does consumers? surplus. As a consequence the static impact of unions is more on equity rather than efficiency.
Keywords: efficiency; union power; market power; rent sharing; airline industry
JEL Codes: L40; L93
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| union power (J51) | wage levels (J31) |
| rent sharing (D33) | costs (J30) |
| union power (J51) | rent sharing (D33) |
| union power (J51) | equity (D63) |
| wage levels (J31) | consumer surplus (D46) |
| union power (J51) | market pricing (D49) |