Earnings and market structure for labor arbitrators

Labor arbitration is a deeply-rooted institution in American industrial relation, but relatively little is known about the market for arbitration services. Analyzing newly available data, selectivity-adjusted reduced form regressions show a positive earnings difference between arbitrators who are or are not members of the prestigious National Academy of Arbitrators (NAA). This finding motivates the specification and testing of a structural model of demand explaining NAA/non-NAA differences in daily rates, and cases decided per year--the underlying arguments explaining the NAA/non-NAA earnings difference.; A monopolistic competition model is posited. The arbitrators' market is largely unregulated. Absent certification and licensing requirements, arbitration is a free-entry profession. However, minimum standards are imposed by agencies, both public and private, which screen applicants for placement on their labor arbitration rosters. Employers and unions often secure the names of prospective third party neutrals, and labor arbitrators from these agencies. However, the parties usually are not required to use labor arbitrators carried on any given roster. They are free to choose whomever they want to arbitrate their dispute. Assumptions added to these facts are: (1) unobserved arbitrator-quality differences exist between NAA and non-NAA members, (2) the union and employer incur joint costs when searching for an arbitrator to judge their dispute. Standard economic incentives, and information about an arbitrator's membership in the NAA yield downward sloping and separate structural demand functions for arbitral services of NAA and non-NAA members.