The single-mindedness of labor unions when transfers are not Lump-Sum

Abstract

In this paper I analyse a labour market where the wage is endogenously determined according to an Efficient Bargaining process between a firm and a labour union whose members are partitioned into two social groups: the old and the young. Furthermore, I exploit the Single-Mindedness theory, which considers the existence of a density function which endogenously depends on leisure. I demonstrate that, when preferences of one group for leisure are higher than those of the other group the latter suffers from higher tax rates and with lower level of wage rates and lower levels of leisure. Finally, since the former is more single-minded, it may exploit its greater political power in order to get a positive intergenerational transfer which takes place via labour income taxation. Empirical evidence from the WERS 2004 survey confirms main results of the model.bargaining models; labour unions; labour-income taxation; single-mindedness