If the interests of outsiders are being ignored in

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Unformatted text preview: ECD. Stat. 60 70 80 MonopolisEc trade unions. Let assume that trade unions care about both employment L and high wages w by maximazing the wage sum S: Trade union indifference curves (i.e, those combinaCon of L and w that produce a given sum S’) are given by: The trade union maximizes the wage sum at the point of tangency between the labour demand schedule and an indifference curve. The resulCng wage wTU exceeds the wage w* obtained in a compeCCve labour market. As a result, involuntary unemployment is at LS ­LTU. Insiders and outsiders Lets assume that trade union only cares about employed members. If the interests of outsiders are being ignored in collecCve bargaining, the trade union indifference curves all turn horizontal, since employment gains beyond the current level accrue to outsiders and therefore do not yield uClity to the union. Thus, addiConal employment of outsiders could not possibly compensate the trade union members for wage concessions. IniCally collecCve bargaining brigs the labour market to point 0, where the hi...
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This note was uploaded on 03/11/2013 for the course ECON ES20013 taught by Professor Martin during the Spring '12 term at University of Bath.

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