moderation, as modelled by a smaller share of the pie for labour (dk < 0), turns out to be bad for employment! Graphically, a lower k shifts the EE locus down and to the left, shifting the equilibrium from E0 to E 1 . The power of the firm is de facto increased, and the wage-employment combination is forced closer to the competitive solution.

Hence, the efficient wage bargaining model yields some surprising conclusions.