Unions and efficient training

Alison L. Booth, Monojit Chatterji

    Research output: Contribution to journalArticlepeer-review

    44 Citations (Scopus)

    Abstract

    The paper examines the optimal level of training investment when trained workers are mobile, wage contracts are time-consistent, and training comprises both specific and general skills. The firm has ex post monopsonistic power that drives trained workers' wages below the social optimum. The emergence of a trade union bargaining at the firm-level can increase social welfare, by counterbalancing the firm's ex post monopsonistic power in wage determination. Local union-firm wage bargaining ensures that the post-training wage is set sufficiently high to deter at least some quits, so that the number of workers the firm trains is nearer the social optimum.

    Original languageEnglish
    Pages (from-to)328-343
    Number of pages16
    JournalEconomic Journal
    Volume108
    Issue number447
    DOIs
    Publication statusPublished - Mar 1998

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