Testing a Model of Trade Union Behaviour: An Application of a Multivariate Cointegration Analysis to UK Aggregate Wage Data

ABSTRACT The first part of the paper considers a behavioural model of trade unionism. Wages and employment are characterized as the outcome of a process by which the union maximizes an objective function containing wages and employment as arguments, and is constrained by a trade-off between these two variables as represented by the firm's labour demand function. In the second part, the model's equilibrium predictions for wages are estimated in the framework of a multivariate error correction model and tested for cointegration with data from Britain's manufacturing sector from 1967 to 1986.