The Factorial Distribution of Income in the Union Bargaining Model

Attention is focused on the implications of the Union Bargaining Model (UBM) for the factorial distribution of income. It is shown that when the contract curve is given, greater union bargaining power raises the wage share. We argue, however, that the factors that strengthen the bargaining power of unions are likely to induce offsetting shifts in the contract curve. A simulation exercise indicates that the shift in the contract curve is likely to be of secondary importance in determining the wage share.