Insider Power in Wage Determination
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NBER Working Paper No. 3179 (Also Reprint No. r1443)
Issued in August 1990
NBER Program(s): LS
The paper argues that wage determination is best seen as a kind of rent sharing in which workers' bargaining power is influenced by conditions in the external labour market. It uses British establishment data from 1984 to show that pay depends upon a blend of insider pressure (including the employer's financial performance and oligopolistic position) and outsider pressure (including external wages and unemployment). Lester's feasible 'range' of wages appears typically to be between 8% and 22% of pay. Estimates of the unemployment elasticity of the wage lie in a narrow band around -0.1.
Published: Economica, Vol. 57, pp. 143-170, (1990).
This paper is available as PDF (314 K) or DjVu (256 K) (Download viewer) or via email.
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