Working Paper: NBER ID: w1870
Authors: Joseph S. Tracy
Abstract: Recent developments in the thoery of strategic bargaining demonstrate howinformational asymmetries can lead to prolonged and costly bargaining. These models can be applied to contract negotiations between unions and firms yielding an economic theory of strikes. To date, however, few empirical tests of these models have been carried out. This paper presents some evidence supporting this view of strikes. A set of predictions concerning the incidence and unconditional duration of strikes is derived from a simple bargaining model where the union is uncertain about the firm's future profitability. These predictions are then tested on a micro data set of major U.S. contract negotiations which took place from 1973 to 1977.
Keywords: strikes; asymmetric information; bargaining; labor negotiations
JEL Codes: J51; J52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increasing the union's uncertainty about the firm's profitability (D89) | Increase in the probability of a strike (C29) |
| Increasing the union's uncertainty about the firm's profitability (D89) | Increase in expected duration of strikes (J52) |
| Larger average rents to be divided between the firm and the union (J59) | Decrease in the likelihood of a strike (J52) |
| Larger average rents to be divided between the firm and the union (J59) | Decrease in expected duration of strikes (C41) |
| Lowering the union's bargaining costs (J50) | Increase in strike activity (J52) |
| Increasing average job tenure and labor market experience (J29) | Decrease in strike activity (J52) |