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Employment in the British Coal Industry: A Test of the Labour Demand Model.

By Charles R Bean and Peter J Turnbull


The authors test the conventional model of labor demand against the alternative that bargaining takes place over both wages and employme nt for a time-series, cross-section data set covering the British coal industry. They note the difficulty of identifying the contract curve under the alternative hypothesis, and suggest the use of variables affecting the union and management status quo points as instruments for the endogenous wage. They find that outside variables, such as benefits and manufacturing wages, are important in determining the level of employment, thus rejecting the labor-demand model. Copyright 1988 by Royal Economic Society.

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