TRADE-UNIONS, EFFICIENCY WAGES, AND SHIRKING

Efficiency wage models typically study the determination of wages and effort levels in the context of a labour market where the supply side is competitive. In this paper we examine the effects of unionisation o n wages and effort. In addition to the monitoring technology where a n oisy signal of each workers performance is received, we propose and in vestigate a spot-check monitoring technology where the effort of a fra ction of workers is measured exactly. We examine models where the unio n can bargain over wages alone, and over wages and effort. In all case s we show that the popular wisdom that unions reduce effort is general ly false.