Working Paper: NBER ID: w2550
Authors: David Card
Abstract: This paper describes a simple model of labor disputes based on the hypothesis that unions use strikes to infer the level of profitability of the firm. The implications of the model are then tested using data on wage outcomes, strike probabilities, and strike durations for a large sample of collective bargaining agreements. Negotiated wages are found to depend negatively on regional unemployment rates and positively on industry-specific selling prices. Contrary to the basic premise of the model, however, there is no evidence of a systematic relation between wages and strike outcomes. Increases in unemployment are found to decrease the probability of strikes, while increases in industry selling prices increase the probability of disputes. Strike durations are only weakly related to unemployment and industry prices, but are negatively correlated with industry output.
Keywords: strikes; wages; signalling model; collective bargaining
JEL Codes: J51; J52
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| wages (J31) | regional unemployment rates (R19) |
| wages (J31) | industry-specific selling prices (L11) |
| regional unemployment rates (R19) | strike probabilities (J52) |
| industry-specific selling prices (L11) | wages (J31) |
| strikes (J52) | wages (J31) |
| strikes (J52) | strike probabilities (J52) |