Edited by John T. Addison and Claus Schnabel
Chapter 6: Collective Bargaining and Macroeconomic Performance
Robert J. Flanagan 1. Introduction Labour unions emerge in virtually all countries, irrespective of stage of development or ideological orientation, as the main vehicle of collective representation of worker interests. But the institutional arrangements through which unions seek to improve the lives of their members vary widely across countries. Moreover, few unions can restrict the consequences of their actions to their members. In most countries, union wage increases spread to non-members through a variety of mechanisms, including threat eﬀects and legal extension. To the extent that union wage impacts exceed productivity impacts, unions will also alter the prices of the products that their members produce, thereby inﬂuencing the welfare of consumers. The ultimate inﬂuence of collective bargaining on third parties is through its impact on macroeconomic performance. Concerns over the eﬀects of unregulated collective bargaining on unemployment, inﬂation and the resilience of national economies in the face of macroeconomic shocks frequently motivate actual or threatened government interventions into the collective bargaining process. This chapter evaluates theory and evidence on the relationship between collective bargaining and macroeconomic performance in industrialized countries. One clear theme from research on this question is that the impact of collective bargaining on macroeconomic performance varies with the strikingly diverse collective bargaining arrangements found around the world. A second theme is that knowledge of these arrangements alone is no longer suﬃcient to provide reliable predictions on macroeconomic outcomes. The aggregate eﬀects of collective bargaining increasingly appear to depend on interactions...
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