Are Effort Bargaining Models Consistent with the Facts? An Assessment of the Early 1980s.

Recent research has attempted to explain the impact of changes in union bargaining on the U.K. productivity miracle of the 1980s. A central part of these explanations is the concept of 'effort' or 'working conditions' as an observable component of negotiations. After reviewing the evidence, this paper shows that, in models where effort and wages are jointly negotiated in an environment of weakening union power, a positive effort-wage association - as observed in the early 1980s in the UK - emerges only under quite special assumptions. We show that the stylized facts are better explained by a model where effort and wages are bargained over sequentially. Copyright 1995 by The London School of Economics and Political Science.