Working Paper: CEPR ID: DP9475
Authors: Antonio Estache; Renaud Foucart
Abstract: In a model of horizontal matching on the labor market, we show that increasing workers? bargaining power may increase some employers? incentive to switch to new production activities. In particular, this could lead to (i) higher wages, (ii) more jobs, (iii) better jobs and (iv) higher profits. Paradoxically, the median voter may object to the economic adjustments because search costs could cut the surplus for a majority of workers, even when it creates jobs for the other ones and increases aggregate surplus.
Keywords: No keywords provided
JEL Codes: C78; J3; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increasing workers' bargaining power (J52) | Employers' incentives to switch to new production activities (F16) |
| Higher bargaining power (D43) | Higher wages (J39) |
| Higher bargaining power (D43) | More jobs (J23) |
| Higher bargaining power (D43) | Better jobs (J62) |
| Higher bargaining power (D43) | Higher profits (D33) |
| Search costs (G19) | Median voter opposition to economic adjustments (E69) |
| Insufficient bargaining power (L14) | Suboptimal employment outcomes (J68) |
| Increased bargaining power (J52) | Improved matching quality (C52) |
| Improved matching quality (C52) | Overall economic conditions (E66) |
| Dominant group of workers' opposition (J59) | Reforms benefiting minority workers (J82) |