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Unions, wage differential and indeterminacy

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  • De Palma, Francesco
  • Seegmuller, Thomas

Abstract

In this paper, we are interested in the influence of labor market structure and wage differential on the occurrence of endogenous fluctuations. For this purpose, we introduce a dual labor market in an overlapping generations model. In the first sector, the wage comes from bargaining between producers and unions, whereas the wage is perfectly competitive in the other sector. In this framework, we compare the conditions for indeterminacy with respect to two different bargaining processes: the right-to-manage model and the efficiency bargaining model. We show that not only the labor market structure and the union bargaining power have an influence on local indeterminacy, but also the technological features. Indeed, when the capital share is greater in the non-unionized sector, indeterminacy always occurs whatever the bargaining process. On the contrary, when the capital share is greater in the unionized sector, indeterminacy emerges only in the efficiency bargaining model with a high enough union bargaining power.
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  • De Palma, Francesco & Seegmuller, Thomas, 2004. "Unions, wage differential and indeterminacy," Research in Economics, Elsevier, vol. 58(3), pages 205-218, September.
    • Handle: RePEc:eee:reecon:v:58:y:2004:i:3:p:205-218
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    Cited by:

    1. Koskela, Erkki & Puhakka, Mikko, 2007. "Stability and Dynamics in an Overlapping Generations Economy with Flexible Wage Negotiations," IZA Discussion Papers 3246, Institute of Labor Economics (IZA).
    2. Sjögren, Tomas, 2017. "Can a Marginally Distorted Labor Market Improve Capital Accumulation, Output and Welfare?," Umeå Economic Studies 946, Umeå University, Department of Economics.

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