NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Efficient and Inefficient Employment Outcomes: A Study Based on Canadian Data

Louis N. Christofides, Andrew J. Oswald

NBER Working Paper No. 3648
Issued in March 1991
NBER Program(s):LS

This paper estimates employment equations based on the traditional labour demand model and modern efficient bargain theory using data drawn from wage contracts signed in the Canadian private unionized sector between 1978 and 1984. Contrary to the labour demand model predictions, the alternative wage rate is consistently significant and has the negative coefficient predicted by efficient bargain theory. Though a credible labour demand model can sometimes be estimated, the results are sensitive to the assumed market structure and to the introduction of alternative wage and unemployment insurance variables. Non-nested tests favour efficient bargain specifications.

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Document Object Identifier (DOI): 10.3386/w3648

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