Working Paper: NBER ID: w2595
Authors: John M. Abowd; Joseph S. Tracy
Abstract: We attempt a synthesis of the industrial relations market structure hypothesis with the modern asymmetric information theory of wage and strike outcomes The industrial relations literature contains a variety of arguments indicating that wage settlements should be positively related to the degree of product market sales concentration and the degree of product market coverage by the union. An asymmetric information bargaining model is specified that relates these same variables to strike probabilities as well as wage settlements. Our empirical analysis is conducted for :he periods from 1970-1380 (strikes) and 1976-1980 (wages). We find that the relation between trade-adjusted sales concentration and wage settlements is positive at low levels of concentration but negative at high levels of concentration. The relation is always negative for strike probabilities. We also find that the relation between the trade-adjusted percent of the product market covered by the same union and the percentage covered by other union are positively related to both wage settlements and strike probabilities. Our empirical analysis includes a rich set of controls including unrestricted time and industry effects, which do not affect the major conclusions.
Keywords: market structure; union wage settlements; strike activity; asymmetric information
JEL Codes: J51; J53; L41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| trade-adjusted sales concentration (F14) | wage settlements (J38) |
| trade-adjusted sales concentration (F14) | strike probabilities (J52) |
| trade-adjusted union coverage (J51) | wage settlements (J38) |
| trade-adjusted union coverage (J51) | strike probabilities (J52) |
| import penetration (K24) | strike rates (J52) |