Working Paper: CEPR ID: DP3748
Authors: Espen Moen; Dag Morten Dalen; Nilshenrik M. von der Fehr
Abstract: In many regulated industries labour unions are strong and there is clear empirical evidence of labour rent-sharing. In this Paper, we study optimal regulation in a model in which wages are determined endogenously by wage bargaining at the firm level. A seemingly robust conclusion, at least when worker bargaining power is considerable, is that incentives for cost efficiency should be stronger than in the standard case in which wages do not depend on the regulatory regime.
Keywords: regulation; wage bargaining
JEL Codes: J30; L51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| regulatory policies (G18) | wage outcomes (J31) |
| wage bargaining (J52) | cost efficiency (D61) |
| regulatory regime (K23) | wage-setting process (J38) |
| bargaining power of workers (J52) | sensitivity of rents to regulatory contract's power (K25) |
| regulatory contract power (K23) | incentives for cost-reducing efforts (M52) |
| wages determined through bargaining (J31) | lower wages due to increased manager bargaining power (J31) |
| timing of effort decisions (C41) | outcomes (P47) |
| structure of regulatory contract (L14) | outcomes (P47) |