Abstract
Augmenting existing models studying incentives to reform labor market, we model labor unions not only as wage setters but also as lobbyists. Acting as interest groups they seek to push governments toward policies that are advantageous to their members. We find that as labor unions can more easily influence governments’ policy decisions, fewer labor market reforms will be implemented, which in turn raises unemployment and inflation, while leaving real wages unaffected. We identify the enlargement of the monetary union and lobbying labor unions as policy complementarities. Furthermore we show that intermediate values of conservatism in monetary policy making of the common central bank yield the worst welfare results for society. Finally, we argue that enlargement may lead to more lobbying.
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Neugart, M. (2003). Interest Groups, Enlargement of the EMU and Labor Market Reform. In: Franzese, R., Mooslechner, P., Schürz, M. (eds) Institutional Conflicts and Complementarities. Springer, Boston, MA. https://doi.org/10.1007/978-1-4757-4062-2_7
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DOI: https://doi.org/10.1007/978-1-4757-4062-2_7
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