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Nominal versus real wage rigidity in a monopoly union: A synthesis

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Abstract

Based upon a monopoly union model, this paper addresses how the degree of money illusion of the union member and the indexation rule of unemployment benefits are interdependent in governing the possibility of either nominal or real wage rigidity. Two main findings emerge from the analysis. First, nominal wage rigidity is present unless union members are characterized by complete money illusion and the government does not adjust its nominal unemployment payments. Second, real wage rigidity holds if union members are free of money illusion and nominal unemployment benefits are fully indexed to either union-set wages or the product price.

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Authors and Affiliations

  1. Sun-Yat Institute for Social Sciences and Philosophy, Academia Sinica, Taiwan

    Ching-Chong Lai

  2. Fu-Jen Catholic University, Taiwan

    Juin-Jen Chang

Authors
  1. Ching-Chong Lai
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  2. Juin-Jen Chang
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Lai, CC., Chang, JJ. Nominal versus real wage rigidity in a monopoly union: A synthesis. Atlantic Economic Journal 30, 61–73 (2002). https://doi.org/10.1007/BF02299147

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