The relative effects of craft-level strikes: The case of airlines

One aspect of bargaining power is the ability of unions to impose losses on firms by striking. Using stock market data from 1963 through 1986, this study tests whether strikes by different crafts have resulted in different losses for airlines. The evidence indicates that strikes by pilots and mechanics initially reduced the share value of struck airlines and that strikes by airline workers in other jobs did not result in significant share value losses. There is no evidence that strikes have imposed permanent losses on air carriers. The authors thank Gordon Karels, David Rosenbaum, and Hendrik Van Den Berg for their helpful comments and thoughtful suggestions. We also thank Jerrold Glass of the Airline Industrial Relations Conference for providing the data on airline strikes.     

Labor’s inequality of bargaining power: Changes over time and implications for public policy

A major justification for enacting the Wagner Act and encouraging collective bargaining was that in the wage-determination process individual workers suffer from an inequality of bargaining power vis-á-vis employers. This critical review of this justification examines the analytical meaning of the concept of an inequality of bargaining power, the factors responsible for this inequality, the change that has taken place in labor’s disadvantage since the 1930s, and the implications for national labor policy. It is concluded that some employers continue to have significant market power over wages but that the extent and degree of labor’s disadvantage in bargaining has diminished substantially since World War II. The implication is that the Wagner Act’s protection of the right to organize remains in the social interest but that the bargaining power of labor unions should be further circumscribed to preserve a balance of power in wage determination. The author thanks Paul Swiercz for helpful comments.     

Free agents’ impact on the labor market for baseball players

This paper evaluates the 1976 free agent rule’s impact on the labor market for baseball players. Free agency has specific consequences for monopsonistic exploitation and racial discrimination in salary determination. It reduces monopsonistic exploitation for all players and increases salary opportunities for black and Latino players. However, this change in a player’s status vis-à-vis a team has generated salary disparities among players based, not on race, but bargaining position. I would like to thank Linda Kammann, Mary O’Brien, and Benjamin Preston for their research assistance. Also I wish to thank John Siegfried and an anonymous referee for their comments. I remain solely responsible for the contents of this paper.     

Bargaining power and equilibrium consumption

We examine how a shift of bargaining power within households operating in a competitive market environment affects equilibrium allocation and welfare. If price effects are sufficiently small, then typically an individual benefits from an increase of bargaining power, necessarily to the detriment of others. If price effects are drastic, the welfare of all household members moves in the same direction when bargaining power shifts, at the expense (or for the benefit) of outside consumers. Typically a shift of bargaining power within a set of households also impacts upon other households. We show that each individual of a sociological group tends to benefit, if he can increase his bargaining power, but suffers if others in his group do the same.     

Collective bargaining and the determinants of teachers’ salaries

Using a national sample of public high schools, we find that bargaining spillovers play an important role in teachers’ labor markets. The spillover variable consistently indicates a larger bargaining effect than does the collective bargaining coverage dummy. We estimate that a 10 percent increase in the state density of teachers’ unions increases the highest teacher salaries by 2.6 percent and the lowest by 0.2 percent. Consistent with prior research, teacher union density was most strongly associated with highest salaries and had a nonsignificant positive association with lowest salaries. Teachers’ unions also affect the structural determinants of teachers’ salaries, offering some additional evidence supporting a median voter model. The proportion of unionized teachers with higher levels of education and experience (i.e., the highest paid) is positively related to highest salaries. Finally, our results confirm the importance of demand factors in teacher wage determination. The authors thank Shawn Windsor for his excellent research assistance and an anonymous referee for helpful comments on a previous draft of this paper. The Inter-University Consortium for Political and Social Research provided the primary data set used in this paper. The U.S. Department of Education, National Center for Education Statistics compiled the original data set. We gratefully acknoledge the assistance of Eric Hanushek and Lori Taylor who also provided data used herein. This research was funded in part by a grant from the McGill Faculty of Management Research Committee.     

ESTIMATING TIME‐VARYING BARGAINING POWER: A FISHERY APPLICATION

We propose an unobserved‐components‐inspired approach to estimate time‐varying bargaining power in bilateral bargaining frameworks. We apply the technique to an ex‐vessel fish market that changed management systems from a regulated open‐access system to an individual fishing quota (IFQ) system over the timespan analyzed. We find that post‐IFQ implementation fishers do improve their bargaining power and thus accrue more of the rents generated by the fishery. However, unlike previous studies, we find that fishers do not move to a point of complete rent extraction. Rather, fishers and processors appear to be in a near‐symmetric bargaining situation post‐IFQ implementation. (JEL C22, L11, Q22)     

A spatial study of teachers’ salaries in Pennsylvania school districts

I explore the relationship among teacher salaries across Pennsylvania school districts. Using techniques developed in spatial econometrics, I find that the error terms in a salary regression are spatially correlated, suggesting evidence of omitted labor market factors. I also find evidence that salaries in nearby, financially similar districts directly influence teacher salaries in a particular district, which is evidence of pattern bargaining or more informal social comparisons across districts. Econometric specifications that ignore these factors overstate the influence of own-district variables, such as economic indicators, on salary. I thank colleagues Linda Babcock and John Engberg for very valuable contributions and for use of their data. Thanks also to Wil Gorr, who helped with some of the GIS aspects of this research. A National Science Foundation grant supported data collection.     

Yardstick competition and political agency problems

We examine how yardstick competition between jurisdictions affects the agency problem resulting from uncertainty about politicians (adverse selection) and their policies (moral hazard). We find that yardstick comparison can contribute both to disciplining and to selecting politicians.Earlier versions of this paper have circulated as Queen Mary Working Paper No. 444 and CORE Discussion Paper 2002/29. We would like to thank our editor, Maurice Salles, two anonymous referees, Mark Armstrong and Enrico Minelli for helpful comments and suggestions. We would also like to thank seminar participants at CORE, Queen Mary, Marseilles, and the 2002 Public Economic Theory conference, Université Paris 1.     

The 150-hour rule as a barrier to entering public accountancy

In many states, CPA licensure now requires 150 credit hours of college coursework thereby adding an extra semester or year of schooling beyond typical undergraduate degree requirements. Thus, the “150-hour rule” should increase the cost of becoming a CPA and, consequently, reduce the supply of new CPAs. We test this hypothesis using panel data on the number of first-time candidates for the CPA exam in each state over the years 1985 to 2002. We find that the imposition of the 150-hour education requirement reduces the number of candidates sitting for the CPA exam by 60 percent and that the “grandfathering” provisions of the 150-hour rule produce a substantial transitory increase in the number of candidates sitting for the exam in the year prior to the rule’s effective date. Examination of candidates’ pass rates on the exam also finds behavior consistent with the hypothesis that the 150-hour rule is a barrier to entry. We thank Wilson Mixon and particular the 2002 Western Economics Association and 2002 Southern Economisc Association meetings for helpful comments. We also thank Ian Elkin, Steven Simms, and especially, Keri Anderson for extraordinarily diligent ressearch assistance.     

An axiomatization of the Nash bargaining solution

I prove that ‘Disagreement Point Convexity’ and ‘Midpoint Domination’ characterize the Nash bargaining solution on the class of two-player bargaining problems and on the class of smooth bargaining problems. I propose an example to show that these two axioms do not characterize the Nash bargaining solution on the class of bargaining problems with more than two players. I prove that the other solutions that satisfy these two properties are not lower hemi-continuous. These different results refine the analysis of Chun (Econ Lett 34:311–316, 1990). I also highlight a rather unexpected link with the result of Dagan et al. (Soc Choice Welfare 19:811–823, 2002).     

Union decertification election outcomes: Bargaining unit characteristics and union resources

Previous analysis using aggregate data has concluded that union decertification activity is “exclusively a product of market conditions.” We employ data disaggregated by local (county) labor market which permits a preliminary investigation of the importance of potential nonmarket influences that are not measurable using aggregate data, namely, the type of bargaining unit, the type of union, the type of employer, and proxies for union resources. It also allows a more precise specification of the labor market characteristics previously found to influence decertification. Our results confirm the importance of market conditions in decertification activity and outcomes, but they also suggest that the likelihood of decertification is much greater in independent unions and in industry-county combinations in which the typical employee works part-time and has limited alternative income opportunities. Institutional characteristics of the union and employer, individual characteristics of bargaining unit members, and local economic conditions are important determinants of decertification.     

A solution for two-person bargaining problems

Everyday bargaining problems are often solved by tossing a coin. A solution for two-person bargaining problems is axiomatized, which is a Pareto-optimal generalization of this coin tossing method. The super-additive solution of Perles and Maschler is also shown to be a generalization of this method. Various properties of our solution are studied, including continuity and risk sensitivity, and compared with properties of other solutions discussed in the literature.This study was financed by the Yrjö Jahnsson Foundation, which is gratefully acknowledged. I like to thank an anonymous referee for useful comments.     

Responding to environmental change in longshoring: Four north American experiences

In longshoring, technological change, expanding competition among ports, and the development of lower cost work forces induced a major restructuring of dock operations. This paper focuses on collective bargaining responses to environmental change and the interplay between those responses, government intervention, the law, and market forces. Four coastal regions in the United States and Canada are studied to gain a broad perspective in two jurisdictions with somewhat differing approaches to government intervention and labor law. Market pressures have become a dominant force, altering the need for and nature of government intervention, and accommodation to change seems most appropriate in today’s highly competitive marketplace. We are indebted to those we interviewed: Brian Ciccozzi, D. P. (Don) Garcia, Terry Lane, Arnold E. Masters, Gene Vrana, Greg Storey, Joe Weiler, and R. V. Wilds. We greatly appreciate the comments of Vitor Marciano, Yoni Reshef, and an anonymous referee, as well as the support of the Social Sciences and Humanities Research Council and the Rice Fellowship. I thank the Oakland University Research Committee for grant support.     

South/non-south differentials in national labor relations board certification election outcomes: Comment

A recent study of National Labor Relations Board (NLRB) certification elections concluded that there are no regional differences in the probability of unionization. This paper suggests that it is inappropriate to draw such broad inferences from NLRB data, since elections occur only where an initial preference for unionism has been expressed. Using a national data set on private sector hospitals, we demonstrate that Southern location significantly reduces the probability of having an election and the probability of negotiating a collective bargaining agreement, but it does not affect the probability of a union election victory. Opinions expressed do not necessarily reflect the views of the authors’ institutions. We would like to thank Peter Feuille and James Kuhn for helpful comments on an earlier version of this paper.     

Pensions and the uses of ignorance by unions and firms

Pensions are contingent claims contracts that are often fashioned by collective bargaining under conditions of asymmetric information and market power. Pensions are not an employer’s or a union’s optimal contract; they represent compromise. Employers use pensions to minimize labor costs and to adjust to market changes. Pensions help unions improve and protect their members’ work lives and help unions to survive as institutions. When workers’ estimations of their pensions differ from their employers’ estimations a moral hazard can exist. Less mobile workers and those with less influence subsidize the pension benefits of other workers or reduce an employer’s costs. Econometric results based on data from the President’s Commission on Pension Policy show that certain workers, namely women, overvalue their plans, which provides an opportunity to lower labor costs and redistribute benefits. Unions have a contradictory effect on information. The author thanks participants in the Cornell University Collective Bargaining workshop and the Harvard Labor Economics workshop. I especially thank James Medoff for his comments.     

Protective service unions’ political activities and department expenditures

This paper examines how police and firefighter unions’ political activities influence departmental expenditures. Unlike prior research, we measure unions’ political activity independently of union bargaining power. Results indicate that a protective service union’s electoral activities positively affect departmental expenditures, and these effects are attributable to union political power rather than multilateral collective bargaining power. The authors thank Steve Blumenfeld, Wally Hendricks, Asghar Zardkoohi, and an anonymous referee for their excellent comments and suggestions.     

Labor’s inequality of bargaining power: myth or reality?

This article responds to Morgan O. Reynolds’ paper which questions the inequality of labor’s bargaining power by addressing four issues: (1) the economic case for collective bargaining, (2) the concept of an inequality of bargaining power, (3) the extent of employer market power, and (4) the role of public policy. The author thanks Jack Blicksilver for helpful comments.     

Labor unions: Victims of their political success?

Conclusion A glimpse of the future of private sector unions may be gleaned from examining the past. Union densities have declined for nearly half a century, and structural and demographic changes, global competition, and various other factors have caused much of this decline. However, as recognized by early union leaders, legislative successes that diminish the role of collective bargaining naturally contribute to a diminished role for unions in the workplace and union decline must inevitably follow. We thank Bruce Kaufman for valuable comments and suggestions on an earlier draft of this paper.     

Room assignment-rent division: A market approach

A group of friends consider renting a house but they shall first agree on how to allocate its rooms and share the rent. We propose an auction mechanism for room assignment-rent division problems which mimics the market mechanism. Our auction mechanism is efficient, envy-free, individually-rational and it yields a non-negative price to each room whenever that is possible with envy-freeness.We would like to thank seminar participants at Barcelona, Boston College, Duke, Koç, Málaga, MIT, Michigan, NYU, conference participants at the First Brazilian Workshop of Game Theory Society (Sao Paulo 2002), SED 2002-Conference on Economic Design (New York City 2002), The Sixth International Meeting of the Society for Social Choice and Welfare (Pasadena 2002), an anonymous referee for their comments and Ahmet Alkan, Selçuk Karabati, Bari Tan, nsan Tunali for insightful discussions. Sönmez gratefully acknowledges the research support of KoçBank via the KoçBank scholar program and Turkish Academy of Sciences in the framework of the Young Scientist Award Program via grant TS/TÜBA-GEBP/2002-1-19. Any errors are our own responsibility.