Testing for efficient contracts in unionized labour markets

Research output: Contribution to journalArticle

Abstract

This paper addresses the design of empirical tests to distinguish between two competing explanations of wage and employment determination in unionized labour markets, the labour-demand and efficient-contract models. We argue that most of the tests employed are restrictive, propose an alternative non-nested approach, a central feature of which is the variation in the set of instrumental variables across the models, and provide an illustration of how it might be implemented, using data from the Work-place Industrial Relations Survey (WIRS) 1984 Panel File. The results demonstrate how the traditional approach can lead to inappropriate conclusions, and thereby emphasize the empirical importance of the specification of the instrumental variables. © Blackwell Publishers Ltd.

Bibliographical metadata

Original languageEnglish
Pages (from-to)171-200
Number of pages29
JournalBulletin of Economic Research
Volume50
Issue number3
Publication statusPublished - 1998