Union Bargaining Power in an Efficiency Wage Environment

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The operation of labor markets differs fundamentally from that of other markets because the commodity traded, hours of labor time, cannot be separated from human beings. Efficiency wage models, and effort-regulation (or shirking) models in particular address the issue of individual motivation by explicitly considering the influence of the wage on the worker's decision concerning the level of effort exerted. This paper offers a theoretical argument that a cost-based conception of union bargaining power is compatible with an effort-regulation/contested exchange framework.