Limitations on Union Power and Strategic Wage Restraint
A potential explanation for why powerful unions do not always cause higher unemployment is their strategic behavior. Even a strong union might choose to exercise wage restraint because its power is limited. Specifically, a union can negotiate the nominal wage, but it cannot unilaterally control the prices set by the firm (which determine the real wage) or the firm's ultimate decision on how many workers to employ.
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Introduction to Macroeconomics Course
Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
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Figure 2.15: Collective Bargaining Coverage and Unemployment in OECD Countries
Limitations on Union Power and Strategic Wage Restraint
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Learn After
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