Title: A comment on fair-shares and trade union behaviour

Authors: Trond-Arne Borgersen

Addresses: Faculty of Business, Social Sciences and Foreign Languages, Ostfold University College, Halden N 1757, Norway

Abstract: This article comments on trade union behaviour and the fair-share rule of McDonald and Solow (1981) |Wage bargaining and employment|, American Economic Review, Vol. 71, pp.896–908. A small intertemporal model of union behaviour which shows how the fair-share rule only is valid in long run equilibrium is presented. An intertemporal fair-share rule which coincides with the McDonald and Solow rule in long run equilibrium is instead derived. The intertemporal rule links wages to the permanent value of labour|s contribution to output, and ensures capital a return equal to its outside option. The model shows how entrenched union behaviour coincides with the reasoning of implicit contract theory, and provides a possible solution to the enforcement problem of implicit contracts.

Keywords: trade union behaviour; fair-share rules; intertemporal behaviour; trade unions; implicit contract theory.

DOI: 10.1504/IJEBR.2009.024021

International Journal of Economics and Business Research, 2009 Vol.1 No.2, pp.228 - 233

Published online: 23 Mar 2009 *

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