The Regulation of Collective Bargaining in Developed Economies: Lessons for Developing Economies

This paper examines public policy towards unionism and collective bargaining with a focus on lessons developing economies can take from the experience of developed economies. Appropriate public policies discourage a union's rent-seeking activities, such as raising wages and other forms of compensation and acting as a pressure group on government. While these rent-seeking activities improve the economic standing of a union's members, they often come at the expense of the incomes of consumers. Policy should instead be designed to support the union in its role as agents of employees at their place of work. The union should facilitate employee participation in the workplace by representing workers in cases where employment contracts are incomplete and benefit the employer at the expense of workers. The author proposes three general principles to implement a successful public policy: the decentralization of collective bargaining; the disengagement of the state from many issues associated with unionism and collective bargaining; and the promotion of competitive markets throughout the economy.