A theoretical study on compansation systems, endogenous timing of wage setting and their effects on economic welfare

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This project firstly analyzes the endogenous order of wage bargaining in a right-to-manage duopoly model with a profit-sharing and a conventional non-profit-sharing firm. The firms announce the periods in which they will engage in wage bargaining with their unions in advance and are then committed to their choices. Once the wage rates are determined by the bargaining, the firms choose the output levels of homogenous products that are sold in the duopoly market. Only the Stackelberg equilibrium, with the profit-sharing firm engaging in wage bargaining first and the conventional r on-profit-sharing firm delaying it, emerges endogenously. This result is consistent with the sequential wage bargaining observed in the spring offensive [Shunto] process in Japan.This project secondly analyzes the effects of sequential wage bargaining on the employment and wages using a unionized duopoly model with a profit-sharing and a conventional non-profit-sharing firm. As a result, it is shown that the sequential wage bargaining makes the employment of the profit-sharing firm stable but that of the conventional firm volatile compared to the simultaneous move. Also, a positive shock to the profit-sharing firm decreases the conventional firm's employment more in the sequential move than in the simultaneous move. Taking into the fact into account that large profit-sharing firms are located in the urban regions while small and medium conventional firms are in the rural regions, our results are consistent with the recent Japanese labour market experiences.