January 2016

IZA DP No. 9691: Gradual Collective Wage Bargaining

published in: Labour Economics, 2016, 40, 37-42

This paper presents an alternative implementation of firm-level collective wage bargaining, where bargaining proceeds as a finite sequence of sessions between a firm and a union of variable size. We investigate the impact of such a 'gradual' union on the wage-employment contract in an economy with concave production. In a static framework, the resulting equilibrium is equivalent to the efficient bargaining outcome. In a dynamic framework with search frictions, we demonstrate that gradual collective wage bargaining coincides with all-or-nothing bargaining when bargaining takes place in fictitious time before production.