Abstract
The claim that in policy games nonneutrality and a stagflation bias emerge in equilibrium if the unions care about inflation, per se, is discussed. This assumption is shown to be not necessary to obtain a stagflation bias; the same applies to nonneutrality if a government acts in the economy. The question of whether unions should be envisaged as “institutions” (i.e., interested in variables unrelated to wages and employment) is also addressed. Two model-based alternatives providing “microeconomic” foundations versus “macroeconomic” foundations to unions' behaviour are presented. The conclusion is that the modelling of unions remains an unsettled problem.
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References
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Acocella, N., Ciccarone, G. Trade unions, nonneutrality and stagflation. Public Choice 91, 161–178 (1997). https://doi.org/10.1023/A:1004948527748
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DOI: https://doi.org/10.1023/A:1004948527748