Several studies of the labor market in transitional economies use static or quasi-dynamic trade union models to explain the employment behavior of the large size firms. One interesting feature of these enterprises is the massive financing of investment through retained earnings. This paper investigates the consequences of this mechanism on the economic decisions of the union and the firm in a two-period setting. Wage claims may be moderated and employment pushed up. While the unions always support the scheme, the attitude of the firms is contingent upon the workers' alternative income.
VRANCEANU, R. (1997). Investment Through Retained Earnings and Employment in Transitional Economies.