Union Power and Product Market Competition: Evidence from the Airline Industry1

Abstract

In this paper we specify and estimate a structural model which links product market competition and union power. The model has a two-stage setting in which wages are determined through bargaining between management and unions in the first stage, with a price-setting market game to follow in the second stage. Using data for eight European airlines from 1976-1994, we provide evidence on price-cost margins and the measurement of market power in a model of rent sharing. In particular, we find that the welfare effects of rent sharing work mainly through reducing firms’ profits, rather than consumers surplus. As a consequence the static impact of unions is more on equity rather than efficiency. JEL Classifications: L40, L93

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Cite this paper

@inproceedings{Neven1998UnionPA, title={Union Power and Product Market Competition: Evidence from the Airline Industry1}, author={Damien J. Neven and Zhentang Zhang}, year={1998} }