ORGANIZATIONAL-CHANGE AND HYSTERESIS IN BRITISH MANUFACTURING-INDUSTRY - A PERSPECTIVE FROM THE DONOVAN COMMISSION REPORT

Labour productivity in British manufacturing industry rose significant ly during the severe recession of the early 1980s, contrary to histori cal and international parallels. Furthermore, labour productivity cont inued to rise during the rest of the decade, despite the return of out put to its pre-1980 level. I explain these stylized facts by analysing wage-work rule negotiations as a three-person non-cooperative bargain ing game in which workers with different skills negotiate independentl y. This model attempts to capture the insights of a Royal Commission o n industrial relations. I also argue that this explanation of the styl ized facts is consistent with the available evidence.