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A Nash-based Union's Utility Function with an Application to Portuguese Aggregate Data

Ana Paula Martins


This paper proposes a union's utility function arising from efficient bargaining between employed and unemployed members. Some features of the monopoly union and efficient bargaining interior solutions are presented.

An empirical application is put forward using Portuguese data. Firstly, employment seems preferred over wages in union preferences if we rely on a lower bound for the alternative to employment. Other conclusions, even if ambiguous, point to the possibility of a monopoly union result during the period 1975 to 1982 (just after the revolution, a time of clear leftist policy and economic turbulence) - with wage elasticity of aggregate labor demand of around 0.4 to 1.5 in absolute value -, and efficient (or rather, a form of cooperative) bargaining after 1983 (till 1993). If efficient bargaining is assumed also in 1975 to 1982, the relative strength of employers, as measured by the Nash maxim and coefficient, increased by more than 50% from 1975-1982 to 1983-1993. Nevertheless, the employers' strength in the coalition seems lower than that of organized workers - if we assume these are risk averse.


Unions, Wage Determination Models, Union Bargaining

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