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Nominal Rigidities in Wage Setting by Rational Trade Unions

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  • Benassy, Jean-Pascal

Abstract

Many rational wage setting schemes, such as the trade unions paradigm, are usually thought to lead to pure real rigidities. In this article, the author constructs a model where a rational trade union without any kind of money illusion sets wage schedules in an economy subject to real and monetary shocks. He makes the realistic assumption that wages can be conditioned on prices. It is found that, although the trade union has the option of fully insulating workers from nominal disturbances, it will rationally choose not to do so and, therefore, nominal rigidities will be present in the economy. Copyright 1995 by Royal Economic Society.

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  • Benassy, Jean-Pascal, 1995. "Nominal Rigidities in Wage Setting by Rational Trade Unions," Economic Journal, Royal Economic Society, vol. 105(430), pages 635-643, May.
    • Handle: RePEc:ecj:econjl:v:105:y:1995:i:430:p:635-43
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    Cited by:

    1. Roberta Gatti & Matteo Morgandi & Rebekka Grun & Stefanie Brodmann & Diego Angel-Urdinola & Juan Manuel Moreno & Daniela Marotta & Marc Schiffbauer & Elizabeth Mata Lorenzo, 2013. "Jobs for Shared Prosperity : Time for Action in the Middle East and North Africa," World Bank Publications - Books, The World Bank Group, number 13284.
    2. James M. Holmes & Patricia A. Hutton, 2005. "A Stochastic Monopsony Theory of the Business Cycle," Economic Inquiry, Western Economic Association International, vol. 43(1), pages 206-219, January.
    3. Thierry Laurent & Hélène Zajdela, 1999. "Emploi, salaire et coordination des activités," Cahiers d'Économie Politique, Programme National Persée, vol. 34(1), pages 67-100.
    4. Bisin, Alberto, 1998. "General Equilibrium with Endogenously Incomplete Financial Markets," Journal of Economic Theory, Elsevier, vol. 82(1), pages 19-45, September.
    5. Ching-Chong Lai & Juin-Jen Chang, 2002. "Nominal versus real wage rigidity in a monopoly union: A synthesis," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(1), pages 61-73, March.
    6. Adriana Cassoni, 1997. "A brief survey on the role of trade unions in labour market," Documentos de Trabajo (working papers) 0697, Department of Economics - dECON.

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