The Relationship Between Union Wage Claims and the Constituents of Firm's Rents : A Theoretical Appraisal

The paper uses the recent union-firm bargaining literature for a theoretical appraisal of the positive relationship found in some empirical studies between union wages and the constituents of firm’s monopolistic rents. The paper assesses that this relationship depends on many factors, such as : - Whether unions have a say on the use of labor (which conditions the possibility that unions may directly capture firm’s rents) - The timing of firm’s decision, that is, on whether wage bargaining takes place before or after other firm’s inputs decisions (because firm threat-point depends on the fixity or the flexibility of its inputs). – the nature of the firm’s technology (because union’s labor share depends on the elasticities of substitution between inputs, and of output with respect of the labor) ;- the definition of the firm’s threat-point (because the higher the firm’s threat-point, the lower the surplus to be shared between the firm and the union). The paper further concludes that a proper empirical appraisal of the relationship between wages and (the determinants of) firm’s rents should include a set of control variables, and a serie of cross effects between those variables and (the determinants of) firm’s rents.