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Efficient Bargaining Under Labor Market Segmentation in a Macroeconomic Model

In: Essays on Wage Bargaining in Dynamic Macroeconomics

Author

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  • Oliver Claas

    (Bielefeld University)

Abstract

This chapter studies the implications of a segmented labor market with efficient wage–employment bargaining on the internal labor market and a competitive external labor market on the temporary equilibrium of a closed monetary macroeconomy of the AS–AD type with a government sector and fiat money. Workers have identical preferences, those on the internal labor market are represented by a labor union. There is no mobility between the labor markets. Union power and union density impact the functional income distribution, but neither affect the individual employment levels nor the aggregate employment level and the aggregate supply function. The wage on the internal labor market is above the wage on the external labor market if and only if the profit share of total revenue is smaller than under a fully competitive labor market. Unique temporary equilibria exist for all combinations of union power and union density. The chapter provides a complete comparative-statics analysis showing in particular a negative price effect of union power and a positive price effect of union density. Single-labor-market models with a fully competitive or a fully unionized labor market as in Chap. 2 are special or limiting cases of the segmented-labor-market model.

Suggested Citation

  • Oliver Claas, 2019. "Efficient Bargaining Under Labor Market Segmentation in a Macroeconomic Model," Lecture Notes in Economics and Mathematical Systems, in: Essays on Wage Bargaining in Dynamic Macroeconomics, chapter 0, pages 109-153, Springer.
    • Handle: RePEc:spr:lnechp:978-3-319-97828-4_4
    DOI: 10.1007/978-3-319-97828-4_4
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