Wage centralization and the scope of firm-union bargaining: 'Efficient bargains' or 'labour demand'?

This paper focuses on the role that wage centralization may play regarding the endogenous determination of the scope of firm-union bargaining. Findings suggest that, as long as the alternative wage is sufficiently low, compliance with the centralized (minimum) wage deal is sustained by wage-takers (small inefficient employers and their employees), and 'labour demand' proves to be an equilibrium bargaining arrangement for wage-setters (large efficient employers and their workers' union). Otherwise, and also if union power is low enough, 'efficient bargains' may be unanimously chosen by the latter agents, as a strategic device to counter losses arising from wage-undercutting rivalry.