Abstract
In this paper we investigate the effect of increasedcompetition on employment inunionised andnon-unionised firms. We model product and labourmarket imperfections, and their interactions, in Nashequilibrium. The model predicts that employment lossin unionised firms in the face of increasedcompetition will be lower compared with non-unionisedfirms. This paradoxical outcome results from anoffsetting beneficial employment effect ofcompetition, which eliminates wage mark-ups inunionised firms. We find empirical support for thetheoretical prediction using U.K. firm level data overthe period 1985–1989.
Similar content being viewed by others
References
Binmore, K. G., A. Rubinstein, A., and A. Wolinsky (1986) 'The Nash Bargaining Solution in Economic Modelling', The Rand Journal of Economics, 17, 176–188.
Bughin, J. (1996) 'Trade Unions and Firms' Product Market Power', Journal of Industrial Economics, XLIV, 289–307.
Bughin, J., and S. Vannini (1995) 'Strategic Direct Investment under Unionized Oligopoly', International Journal of Industrial Organization, 13, 127–145.
Collie, D., and H. Vandenbussche (1999) 'FDI and Unions', CEPR Discussion Paper.
Evans, D. (1987) 'The Relationship between Firm Growth, Size and Age: Estimates for 100 Manufacturing Firms', Journal of Industrial Economics, 35, 567–581.
Gregg, P., and A. Yates (1991) 'Changes in Trade Union and Wage Setting Arrangements in the 1990's', British Journal of Industrial Relations, 29, 361–376.
Konings, J., and H. Vandenbussche, H. (1995) 'The Effect of Increased Foreign Competition on UK Employment and Wages: An Empirical Exploration', Weltwirtschaftliches Archiv.
Konings, J., and P. Walsh (1994) 'Evidence of Efficiency Wage Payments in UK Firm Level Panel Data', The Economic Journal, 104, 542–555.
Layard, R., S. Nickell, and R. Jackman (1991) Unemployment, Macroeconomic Performance and the Labour Market. Oxford: Oxford University Press.
Nickell, S. (1999) 'Product Markets and Labour Markets', Labour Economics, 6, 1–23.
Nickell, S., J. Vainiomaki, and S. Wadhwani (1994) 'Wages and Product Market Power', Economica, 61, 457–473.
Oswald, A. (1993) 'Efficient Contracts Are on the Labour Demand Curve: Theory and Facts', Labour Economics, 1, 85-114.
Salop, S. (1979) 'Monopolistic Competition with Outside Goods', Bell Journal of Economics, 10, 141–156.
Slaughter, M. (1996) 'International Trade and Labour Demand Elasticities', mimeo, Dartmouth College.
Sutton, J. (1986) 'Non-Cooperative Bargaining Theory: An Introduction', Review of Economic Studies, 53, 709-24.
Weiss, C. R. (1995) 'Product Market Power and Dynamic Labour Demand', Arbeitspapiere des Instituts Für Volkswirtschaftslehre, Johannes Kepler Universität Linz.
Author information
Authors and Affiliations
Rights and permissions
About this article
Cite this article
Konings, J., Walsh, P.P. The Impact of Product Market Competition on Employment Determination in Unionised and Non-Unionised Firms: Firm Level Evidence for the U.K.. Review of Industrial Organization 17, 385–394 (2000). https://doi.org/10.1023/A:1007846400596
Issue Date:
DOI: https://doi.org/10.1023/A:1007846400596