NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Insider Power in Wage Determination

David G. Blanchflower, Andrew J. Oswald, Mario D. Garrett

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).

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