Journal Article

No. 2010-30 | October 15, 2010
Increased Price Markup from Union Coordination―OECD Panel Evidence PDF Icon

Abstract

Although coordination of wage bargaining probably affects entry barriers and competition in product markets, research on price determination has typically not considered such factors. We argue that the price markup depends on wage setting institutions and present empirical evidence in form of estimated price equations in a panel of 15 OECD countries. The estimates show that consumer prices may be as much as 21 percent higher in coordinated compared to uncoordinated countries, solely due to the effect of coordination on the markup. Since other studies find that coordination has a dampening effect on wages, this may explain why there is no clear effect of coordination on unemployment.

JEL Classification

C23 E31 J51

Citation

Roger Bjørnstad and Kjartan Øren Kalstad (2010). Increased Price Markup from Union Coordination―OECD Panel Evidence. Economics: The Open-Access, Open-Assessment E-Journal, Vol. 4, 2010-30. http://dx.doi.org/10.5018/economics-ejournal.ja.2010-30

Assessment

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