Efficiency Wages and Local Wage Bargaining.

In the literature on wage drift, it is often argued that strikes or work-to-rule practices are used to force employers to pay a wage rate that exceeds the contract wage. Here, the authors introduce the efficiency wage argument as a foundation for bargaining about wage drift. Contrary to the view in most bargaining models, where firms and unions struggle to divide a fixed pie, given employment, they take the relation between wages and revenues explicitly into account. The implications for wages and employment appear to differ not only with respect to the order of magnitude but also in a qualitative sense. Copyright 1996 by The editors of the Scandinavian Journal of Economics.