Union duopoly with heterogeneous labor: the effect of minimum wage regulation

Abstract

Purpose

The purpose of this paper is to analyse the labor market outcome when there are two unions in the industry, representing heterogeneous workers – substitutes or complements in production – and using wage strategies, in the presence of minimum wage regulation.

Design/methodology/approach

Three strategic environments are considered: symmetric Bertrand‐Nash duopoly, Stackelberg duopoly, and efficient cooperation between the two unions.

Findings

Usually, minimum wage legislation (floor) would decrease employment; it is shown that in Stackelberg environment, minimum wage legislation may induce an increase in total employment. Wage‐pushing strategies by a leader may also arise; and if workers are substitutes, entry deterrence strategies by the leader may be observed.

Originality/value

This paper analyses the impact of minimum wages in duopoly scenarios in an extensive way.

Citation

Martins, A.P. (2009), "Union duopoly with heterogeneous labor: the effect of minimum wage regulation", International Journal of Social Economics, Vol. 36 No. 5, pp. 580-607. https://doi.org/10.1108/03068290910954040