Individual versus collective bargaining under relative income concerns

Year: 2023
Type: Journal Publication
Journal: Economics Letters


We compare individual and collective bargaining when workers have relative income concerns and employment relationships are characterized by moral hazard. We show that collective bargaining internalizes externality effects that arise from other-regarding preferences. This improves firms’ abilities to create effort incentives and can therefore reduce inefficiencies associated with asymmetric information. We show that if relative income concerns are not too strong, both firms and workers strictly prefer collective bargaining.

Participating Institutions

TRR 266‘s main locations are Paderborn University (Coordinating University), HU Berlin, and University of Mannheim. All three locations have been centers for accounting and tax research for many years. They are joined by researchers from LMU Munich, Frankfurt School of Finance and Management, Goethe University Frankfurt, University of Cologne and Leibniz University Hannover who share the same research agenda.

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