Working Papers in Economics,
University of Bergen, Department of Economics

Abstract: This paper studies how a high overtime wage rate and a low labor stock may be used as commitment devices by price-setting firms. We show that high overtime pay premiums may both decrease and increase equilibrium employment. If an employment-oriented union or the firm itself sets the overtime wage, then the overtime wage premium will be high enough to ensure that no overtime is used in equilibrium. If the overtime wage is set by a sufficiently wage-oriented union, however, overtime will be used in equilibrium, and employment is substantially lower. Thus the authorities may be able to increase employment if it can make a union act in a less wage-oriented manner. We show that this can be done by setting a minimum overtime pay premium. Minimum wage regulation could have the opposite effect.

Keywords: Overtime; Bertrand competition; unionization; regulation

JEL-codes: J21; J51; J88; L13

25 pages, December 9, 2002

Full text files

22-02.pdf  Full text

Download statistics

• University of Bergen, Department of Economics
• Home page for this series

Questions (including download problems) about the papers in this series should be directed to Kjell Erik Lommerud ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:bergec:2002_022This page generated on 2024-10-27 22:37:47.