Efficient Bargaining in a Dynamic Macroeconomic Model
This chapter analyzes the implications of efficient wage–employment bargaining in a closed monetary macroeconomic model of the AS–AD type with a government sector and fiat money. The consumption sector is made up of heterogeneous consumers—shareholders and workers—with endogenous labor supply and an endogenous reservation wage.
Unique temporary equilibria exist for all levels of bargaining power. These induce the determination of real allocations as well as nominal prices, wages, savings, and deficits. The comparative-statics analysis shows in particular that an increase of union power induces negative output and employment effects under a negative general-equilibrium price feedback. Equilibria under efficient bargaining are not Second-Best optimal.
The chapter concludes describing the evolution of such economies under perfect foresight and discusses the role of union power for existence and stability. Due to endogenous budget deficits/surpluses, stationary states fail to exist generically. The stability analysis distinguishes between the dynamics in nominal terms and the evolution of the real economy. The associated concepts of convergence to characterize balanced monetary expansion are introduced. Fiscal policy parameters and union power exhibit structural tradeoffs for the existence of balanced paths and their stability.
- Blanchard OJ, Fischer S (1993) Lectures on macroeconomics, 7th edn. The MIT Press, CambridgeGoogle Scholar
- Böhm V (2017) Macroeconomic theory. Springer texts in business and economics. Springer International Publishing, ChamGoogle Scholar
- Böhm V, Pampel T, Wenzelburger J (2007) On the stability of balanced growth. Discussion Paper 548, Bielefeld University, Department of EconomicsGoogle Scholar
- Booth AL (1995) The economics of the trade union. Cambridge University Press, CambridgeGoogle Scholar
- Dierker H, Grodal B (1986) Non-existence of Cournot–Walras equilibrium in a general equilibrium model with two oligopolists. In: Hildenbrand W, Mas-Colell A (eds) Contributions to mathematical economics, Chap. 10. In honour of Gérard Debreu, North-Holland Publishing Company, AmsterdamGoogle Scholar
- Gaube T (1997) Numéraire und Second-Best-Gleichgewicht: Eine Untersuchung allokativer Preisnormierungseffekte in Ramsey–Boiteux-Modellen. University of Mannheim, MannheimGoogle Scholar
- Koskela E, Puhakka M (2006) Stability and dynamics in an overlapping generations economy under flexible wage negotiation and capital accumulation. Working Paper 1840, CESifo Working Paper SeriesGoogle Scholar
- Layard PRG, Nickell SJ, Jackman R (2006) Unemployment. Macroeconomic performance and the labour market. Oxford University Press, OxfordGoogle Scholar
- McDonald IM, Solow RM (1981) Wage bargaining and employment. Am Econ Rev 71(5):896–908Google Scholar
- Peters HJM (1992) Axiomatic bargaining game theory. No. 9 in theory and decision library: series C, Game theory, mathematical programming and operations research. Kluwer, DordrechtGoogle Scholar