According to the standard union bargaining model, unemployment benefits should have big effects on wages, but product market prices and productivity should play no role in the wage bargain. We formulate an alternative strategic bargaining model, where labour and product market conditions...

We offer a unified framework to analyze the determination of employment, employee effort, wages, profit-sharing and capital structure when firms face stochastic revenue shocks. We apply a generalized Nash bargaining solution, which extends the wage bargaining literature by incorporating...

Efficiency wage models have been criticized because worker malfeasance can be prevented in a pareto efficient manner by requiring workers to post a bond which they lose if they are caught cheating. However, since it is costly to monitor workers and costless to demand a larger bond, firms should...

Much recent thought has been devoted to the macroeconomic importance of the existence of wage contracts. Still, some puzzling features of the most conspicuous form of wage bargaining, that done formally by employers and labor unions, deserve further theoretical attention. Among these important...

We construct a model integrating the efficiency wage model of Shapiro-Stiglitz (1984) (SS), with an individual wage bargaining model in the Diamond-Mortensen-Pissarides (DMP) tradition where firms and workers form pairwise matches. We show that when workers may threaten to shirk on the job and...

I analyze an overlapping generations model with old age productivity risk where wages, employment and severance payments are set through efficient bargaining between risk averse unions and risk neutral firms. Equilibrium allocations with limited union membership are second-best inefficient as...

We develop a simple general equilibrium model of production where, despite the existence of involuntary unemployment, non-equalized job rents are the only distortion. Hence, a standard GDP function exists. Unemployment results from either efficiency wage setting or wage bargaining

A model is developed to analyse the relation between wages and technological complexity, as characterised by the "O-ring" theory of production. In equilibrium, the adoption of a relatively complex technology induces the employer to pay higher wages. We argue that the model can explain increased...