Optimal Degree of Union Centralization

Abstract

By viewing trade unions as economic units analogous to firms, which can be studied by applying the standard tools of microeconomic analysis, this article aims to derive the optimal degree of union centralization in a multi-unions simple general equilibrium model. Differently from previous literature, we show that if the degree of centralization among the labour unions is considered as the outcome of a voting process, full centralization always emerges as equilibrium and standard policy neutrality implications hold. Moreover, the equilibrium represents a Pareto improvement.