Standard models of equilibrium unemployment assume exogenous labour market institutions and flexible wage determination. This paper models wage rigidity and collective bargaining endogenously, when workers differ by observable skill and may adopt either individualized or collective wage...

In this study we examine the contribution of severance pay to employment and unemployment development using data on industrialized OECD countries. Our starting point is Lazear's (1990) empirical dictum that severance payment requirements adversely impact the labor market. We extend his sample...

We investigate compensation design in tight labor markets. With private information about firm productivity, firms prefer competing for workers by raising fixed wages. However, workers in better bargaining positions often prefer negotiating for higher bonuses or option pay. We characterize when...