Working Paper: CEPR ID: DP2738
Authors: Kjell Erik Lommerud; Odd Rune Straume; Lars Sørgard
Abstract: We examine how a merger affects wages of unionized labour and, in turn, the profitability of a merger under Cournot competition in differentiated products. If unions are plant-specific, we find that a merger is more profitable than in a corresponding model with exogenous wages. In contrast to the received literature, we find that it can be more profitable to take part in a merger than to be an outsider. For firm-specific unions, on the other hand, results are reversed.
Keywords: endogenous wages; merger profitability; trade unions
JEL Codes: J51; L13; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| merger (G34) | decrease in wages for plant-specific unions (J51) |
| decrease in wages for plant-specific unions (J51) | increase in merger profitability (G34) |
| merger (G34) | increase in wages for firm-specific unions (J59) |
| increase in wages for firm-specific unions (J59) | decrease in merger profitability (G34) |
| presence of plant-specific unions (J51) | wage dampening effects (J38) |
| wage dampening effects (J38) | increase in merger profitability (G34) |
| highly employment-oriented unions (J51) | minimal wage drop (J31) |