Exploitation of Collective Bargaining in the Labor MarketMPRA Paper from University Library of Munich, Germany Abstract: We consider a collective bargaining model for the determination of labor hours and wages in the presence of a government that can tax corporate income. The original form of this model was developed by Del Rey et al. (2022) in the absence of taxes. Using our modified model with taxes, we investigate whether workers or the firm can exploit the bargaining equilibrium, with the help of Sertel's (1992a) pre-donation idea, by committing to transfer a part of their would-be payoffs to the other party. We show that pre-donation by any party cannot affect the equilibrium hours or the social welfare while it may affect the welfare distribution in the economy if and only if the corporate tax rate is positive. In case this tax rate is positive, we find that making pre-donation to the firm is beneficial for workers. Moreover, the optimal pre-donation of workers enables them to fully extract the tax revenue that the government could obtain in the absence of pre-donation while keeping the welfare of the firm unchanged. On the other hand, making pre-donation to workers is harmful to the firm and beneficial for the government while having no effect on the welfare of workers. Keywords: Wage determination; Nash bargaining; pre-donation; exploitation. (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:117588 Access Statistics for this paper More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.