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Wages and employment in a repeated game with revenue fluctuations

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  • Schultz, Christian

Abstract

This paper analyses wages and employment in a repeated game between a union and a firm. The parties cannot enter a binding contract, and revenue is fluctuating. It is shown that if discount factors are moderate, then the best sequence of wage rates and employments sustainable in a subgame perfect equilibrium and sharing the surplus in fixed proportions, has a more counter cyclical wage rate than the one sharing the surplus in the same proportions in each period. This result holds true whether the revenue shocks are i.i.d. or follows a Markov process with persistence.
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  • Schultz, Christian, 1997. "Wages and employment in a repeated game with revenue fluctuations," European Economic Review, Elsevier, vol. 41(1), pages 147-162, January.
    • Handle: RePEc:eee:eecrev:v:41:y:1997:i:1:p:147-162
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    Cited by:

    1. 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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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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