De Economist

, Volume 138, Issue 3, pp 321–339 | Cite as

Coordinating unions, wages and employment

  • Jan Jacobs
  • Maarten Janssen


In this paper we consider a two-sector economy in which individual unions are affiliated into a federation of unions. We analyze the consequences of two different types of wage setting. Firstly, individual unions set wages in their own sector without taking into account the effect of their wages on the employment level in the other sector. There may be positive as well as negative externalities. A positive (negative) externality may exist if a higher (lower) wage in one sector implies a higher level of employment in the other sector. Both cases may occur in our model. Secondly, wages in the two sectors are set by the federation of unions. We show that in this case higher (lower) wages result than in the first case if a positive (negative) externality exists.


International Economic Public Finance Negative Externality Employment Level Individual Union 
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Copyright information

© Kluwer Academic Publishers 1990

Authors and Affiliations

  • Jan Jacobs
  • Maarten Janssen
    • 1
  1. 1.Department of EconomicsUniversity of GroningenAV GroningenThe Netherlands

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