Contracting with a trade union leader interface Available to Purchase

Looks at a union model where a trade union leader represents union members in dealing with the firm. The union leader is risk neutral and derives his utility solely from the union fees. The employment level is efficient, and equivalent to the contracts without a union leader, when the unemployed receive severance pay and wages and employment is included in the contract. In this case the outcome of the contract does not depend on whether severance pay is paid by the firm or is as a result of internal redistribution of income from employed to unemployed members. In contrast with the efficient bargaining literature, less than efficient levels of employment arise if severance pay is excluded. It is in the interest of the union leader that the unemployed receive no severance pay. This leads to a conflict of interest between the union leader and the members of the union.