Efficiency wages and union-firm bargaining

This paper combines the efficiency wage and union-firm bargaining approache s to wage determination to produce a unified model that leads to higher wag es, confirming an original insight of Summers (Am. Econom. Rev. 78 (1988) 3 83). Increases in monopoly power on the goods market also have a stronger i mpact on wages when there are efficiency wage effects, but the proportional effect of bargaining and market power on the wage is independent of the pr oportional effect of efficiency wages. We also find that efficiency wage ef fects alter the form of the labour demand curve to make it backward bending . (C) 2000 Elsevier Science S.A. All rights reserved.