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Can underemployment persist in an expanding economy? Clues from a non-Walrasian OLG model with endogenous longevity

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  • Gregory Ponthiere

Abstract

This paper aims at casting a new light on the persistence of underemployment in emerging economies, by examining the relationship between labour market imperfections and longevity changes. For that purpose, we develop a two-period OLG model where longevity depends positively on the real wage, but negatively on the underemployment level, which both result from wage negotiations between a trade-union, representing workers (i.e. young generation), and the management, representing capital-holders (i.e. old generation). The existence, uniqueness and stability of a non-trivial steady-state equilibrium are studied. The distribution of bargaining power is shown to be a major determinant of the short run and long run dynamics of employment, production and longevity. The dynamics is also shown to be significantly sensitive to the precise form under which job quality affects longevity.
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  • Gregory Ponthiere, 2008. "Can underemployment persist in an expanding economy? Clues from a non-Walrasian OLG model with endogenous longevity," Economic Change and Restructuring, Springer, vol. 41(2), pages 97-124, June.
    • Handle: RePEc:kap:ecopln:v:41:y:2008:i:2:p:97-124
    DOI: 10.1007/s10644-008-9043-7
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    1. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
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    6. Bowden, S. & Higgins, D.M. & Price, C., 2006. "A very peculiar practice: Underemployment in Britain during the interwar years," European Review of Economic History, Cambridge University Press, vol. 10(1), pages 89-108, April.
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    Cited by:

    1. Gregory Ponthiere, 2009. "Rectangularization And The Rise In Limit‐Longevity In A Simple Overlapping Generations Model," Manchester School, University of Manchester, vol. 77(1), pages 17-46, January.

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    More about this item

    Keywords

    Bargaining power; Longevity; OLG model; Underemployment; Wage-bargaining; I12; J52; O41;
    All these keywords.

    JEL classification:

    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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