Seminario CEA - Miércoles 9/9/2026, 13:00 HRS - Sala de Consejo, piso 4, Beauchef 851 - "Power Distribution and Efficiency: Theory and Evidence from Unionized Firms" - Estéfano Rubio (UAI)

Tema: «Power Distribution and Efficiency: Theory and Evidence from Unionized Firms«

Presenta: Estéfano Rubio (UAI)

Power is irrelevant for efficiency in a complete contract world, but when some actions are noncontractible it can affect both the size and distribution of surplus. This paper studies groups with little formal power that engage in coercion—noncontractible actions that shift the bargaining disagreement point in their favor while destroying surplus—and shows that transferring bargaining power toward them can crowd out coercion and enhance efficiency. I investigate this mechanism in union–management disputes, providing early causal evidence on power’s efficiency effects in incomplete-contract settings. Using administrative data, including population-level tax records, from a 2017 reform of the Chilean labor code, I run an event-study design exploiting institutions that fix the timing of collective bargaining, generating quasi-random assignment to the new versus the old regime across firms. The reform leaves profits statistically unchanged while increasing productivity and workers’ remuneration without reducing employment, and reduces measures of conflict and unionization. Efficiency gains are concentrated where unions were initially weak, while wage and unionization responses are larger where unions start stronger—a nonlinear response to bargaining power. A bargaining model with coercion rationalizes these findings, characterizes surplus-maximizing power distributions, and shows that power can become a burden: management’s welfare can fall as its own bargaining power rises when reduced coercion expands surplus. A calibration implies the union’s surplus share rises from 0.39 to 0.48 without harming profits. More broadly, the results suggest that equality and efficiency need not trade off when contracts are incomplete.

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