IDEAS home Printed from https://ideas.repec.org/p/cte/werepe/2896.html
   My bibliography  Save this paper

Demand uncertainy and unemployement in a monopoly union model

Author

Listed:
  • Licandro, Omar

Abstract

The main concern of this paper is to show the importance of demand uncertainty in the determination of the "natural rate of unemployment". In the goods market there is demand heterogeneity -coming from preferences, and demand uncertainty -related solely to heterogeneity. Demand uncertainty is introduced in a monopoly union model where unions set wages at the first stage of the game, without knowing with certainty the demand for the good produced by the firm. Because the union assigns a positive probability at the event "underemployment equilibrium", it expects that the expected unemployment rate be positive. Since all the uncertainty is firm specific (i.e., there is not aggregate uncertainty), aggregate employment is equal to the union expected employment and then there is unemployment at equilibrium. In some islands the idiosyncratic demand shock is high and firms produce constrained by its full-employment capacity, but at the same time in the other islands the idiosyncratic demand shock is low and firms optimally produce less than its full-employment output.

Suggested Citation

  • Licandro, Omar, 1993. "Demand uncertainy and unemployement in a monopoly union model," UC3M Working papers. Economics 2896, Universidad Carlos III de Madrid. Departamento de Economía.
    • Handle: RePEc:cte:werepe:2896
    as

    Download full text from publisher

    File URL: https://e-archivo.uc3m.es/rest/api/core/bitstreams/6dd55562-34e2-4d9e-b771-1af684fe1d0e/content
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Licandro, Omar, 1992. "A non-walrasian general equilibrium model with monopolistic competition and bargaining," UC3M Working papers. Economics 5818, Universidad Carlos III de Madrid. Departamento de Economía.
    2. Arnsperger, Christian & de la Croix, David, 1993. "Bargaining and equilibrium unemployment : Narrowing the gap between New Keynesian and 'disequilibrium' theories," European Journal of Political Economy, Elsevier, vol. 9(2), pages 163-190, May.
    3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    4. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    5. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    6. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    7. Maria Paz Espinosa & Changyong Rhee, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(3), pages 565-588.
    8. Sneessens, Henri R., 1987. "Investment and the inflation-unemployment tradeoff in a macroeconomic rationing model with monopolistic competition," European Economic Review, Elsevier, vol. 31(3), pages 781-808, April.
    9. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
    10. Gary D. Hansen & Randall Wright, 1992. "The labor market in real business cycle theory," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 16(Spr), pages 2-12.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sanz, Nicolas & Schwartz, Sonia, 2013. "Are pollution permit markets harmful for employment?," Economic Modelling, Elsevier, vol. 35(C), pages 374-383.
    2. Croix, David de la & Licandro, Omar, 1993. "Underemployment and capital irreversivility in a unionized overlaping generations economy," UC3M Working papers. Economics 2903, Universidad Carlos III de Madrid. Departamento de Economía.
    3. Salle, Isabelle & Yildizoglu, Murat & Zumpe, Martin & Sénégas, Marc-Alexandre, 2017. "Coordination through social learning in a general equilibrium model," Journal of Economic Behavior & Organization, Elsevier, vol. 141(C), pages 64-82.
    4. Pasquale Commendatore & Ingrid Kubin, 2009. "Dynamic effects of regulation and deregulation in goods and labour markets," Oxford Economic Papers, Oxford University Press, vol. 61(3), pages 517-537, July.
    5. de la Croix, David & Fagnart, Jean-Francois, 1995. "Underemployment of production factors in a forward-looking model," Labour Economics, Elsevier, vol. 2(2), pages 131-159, June.
    6. Matthias Strifler & Thomas Beissinger, 2016. "Fairness Considerations in Labor Union Wage Setting – A Theoretical Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 303-330, July.
    7. Vlassis, Minas, 1996. "Endogenous wage-bargaining institutions in oligopolistic industries," UC3M Working papers. Economics 6014, Universidad Carlos III de Madrid. Departamento de Economía.
    8. Ieva Rubene & Paolo Guarda, 2004. "The new Keynesian Phillips curve: empirical results for Luxembourg," BCL working papers 11, Central Bank of Luxembourg.
    9. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
    10. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
    11. Sneessens, Henri R., 1992. "Contraintes de débouchés, capacités de production et chômage dans un modèle macroéconomique avec concurrence imparfaite," L'Actualité Economique, Société Canadienne de Science Economique, vol. 68(1), pages 140-174, mars et j.
    12. Shi, He-ling, 1992. "Continuum of Equilibria and Business Cycles: A Dynamic Model of Mesoeconomics," American Economic Review, American Economic Association, vol. 82(2), pages 372-378, May.
    13. Licandro, Omar, 1992. "A Non-Walrasian General Equilibrium Model with Monopolistic Competition and Bargaining," LIDAM Discussion Papers IRES 1992004, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    14. repec:pri:indrel:dsp01cc08hf62w is not listed on IDEAS
    15. Fanti, Luciano & Buccella, Domenico, 2015. "Bargaining agenda, timing, and entry," MPRA Paper 64089, University Library of Munich, Germany.
    16. Nicholas Lawson, 2011. "Is Collective Bargaining Pareto Efficient? A Survey of the Literature," Journal of Labor Research, Springer, vol. 32(3), pages 282-304, September.
    17. Huang, Kevin X. D. & Liu, Zheng, 2002. "Staggered price-setting, staggered wage-setting, and business cycle persistence," Journal of Monetary Economics, Elsevier, vol. 49(2), pages 405-433, March.
    18. Anuradha Patnaik, 2018. "Price co-movements, commonalities and responsiveness to monetary policy: empirical analysis under Indian conditions," Asia-Pacific Sustainable Development Journal, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), vol. 25(2), pages 77-97, December.
    19. Etro, Federico, 2017. "Research in economics and macroeconomics," Research in Economics, Elsevier, vol. 71(3), pages 373-383.
    20. Licandro, Omar, 1991. "Q investment models, factor complementary and monopolistic competition," UC3M Working papers. Economics 2794, Universidad Carlos III de Madrid. Departamento de Economía.
    21. Ronny Mazzocchi, 2013. "Scope and Flaws of the New Neoclassical Synthesis," DEM Discussion Papers 2013/13, Department of Economics and Management.

    More about this item

    Keywords

    Unemployment;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cte:werepe:2896. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ana Poveda (email available below). General contact details of provider: http://www.eco.uc3m.es/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.