The separation in large corporations of ownership from management and the presence of unions in labor markets represent two important widely occurring features of modern economies. Moreover, their importance also seems to be related to the degree of imperfect competition in product markets, since there are theoretically and empirically reasons suggesting that imperfections in the labor market are correlated with imperfections in the product market. This chapter provides a review of the recent contributions in the Industrial Organization game-theoretical literature which analyze the interplay between managerial delegation and union wage bargaining in imperfectly competitive markets. In particular, while the earliest strategic delegation literature points out that delegating strategic decisions to managers acts as a commitment device with a view to altering product market competition, in the presence of unionization, managerial delegation contracts can also be used by firms’ owners to commit to an employment policy, which impacts on the wage bargaining process. The role highlighted by the literature of this wage or bargaining effect related to managerial delegation contracts in affecting product and labor market outcomes, structure and institutions is presented and discussed. Notably, by investigating such issues, those works also contribute to the positive political economy literature. This is because, on the one hand, the underlying processes are based on rational choice and strategic behavior by firms and, on the other hand, their concern includes market institutions and change, as well as welfare and policy implications.
The Political Economy of Managerial Delegation with Unionized Labor Markets
Meccheri N
2022-01-01
Abstract
The separation in large corporations of ownership from management and the presence of unions in labor markets represent two important widely occurring features of modern economies. Moreover, their importance also seems to be related to the degree of imperfect competition in product markets, since there are theoretically and empirically reasons suggesting that imperfections in the labor market are correlated with imperfections in the product market. This chapter provides a review of the recent contributions in the Industrial Organization game-theoretical literature which analyze the interplay between managerial delegation and union wage bargaining in imperfectly competitive markets. In particular, while the earliest strategic delegation literature points out that delegating strategic decisions to managers acts as a commitment device with a view to altering product market competition, in the presence of unionization, managerial delegation contracts can also be used by firms’ owners to commit to an employment policy, which impacts on the wage bargaining process. The role highlighted by the literature of this wage or bargaining effect related to managerial delegation contracts in affecting product and labor market outcomes, structure and institutions is presented and discussed. Notably, by investigating such issues, those works also contribute to the positive political economy literature. This is because, on the one hand, the underlying processes are based on rational choice and strategic behavior by firms and, on the other hand, their concern includes market institutions and change, as well as welfare and policy implications.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
