Abstract : This article provides a model of labor market equilibrium with search and
within-firm strategic bargaining.We yield explicit closed form solutions with heterogeneous
labor inputs and capital. The solution exhibits overemployment.We
show that higher relative bargaining power for some groups of workers may lead
to overemployment relative to other groups, with such other groups being underemployed
instead if they have a lower relative bargaining power. Similarly, the
hold-up problem between capitalists and employees does not necessarily lead to
underinvestment in physical capital.
Pierre Cahuc, François Marque, Etienne Wasmer. A theory of wages and labor demand with intra-firm bargaining and matching frictions. International Economic Review, Wiley, 2008, 49 (3), pp.943 - 972. ⟨hal-03415795⟩