Resilience in collective bargaining

Abstract

A central finding of the theoretical literature on bargaining is that parties’ attitudes towards delay influence bargaining outcomes. However, the ability to endure delays, resilience, is often private information and hard to measure in most real-world contexts. In the context of collective bargaining, we show firms actively attempt to become financially resilient in anticipation of labor negotiations. Firms adjust their financial resilience to respond to the passage of right-to-work laws (RWLs). Unions’ financial structure also responds to RWLs. Our findings suggest resilience is key to understanding the process through which collective bargaining determines wages.