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Dynamic Games and Growth Cycles in Unionised Economies

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  • Enrico Marchetti

Abstract

In this paper we integrate the dynamic models formulated by the microeconomic theory of trade unions and the differential games approach. We demonstrate that the results of the dynamic monopoly union model, elaborated by Kidd and Oswald (1987) and Jones and McKenna (1994), can be obtained as solutions of a Stackelberg differential game between firms and unions under particular assumptions on union’s membership dynamic. We also develop a Nash differential game whose solutions imply a cycle in wage share of product and employment rate which resembles Goodwin’s (1967) cyclical growth path. This result is obtained by use of the Hopf theorem on local bifurcations, under particular hypotheses on the membership dynamics.

Suggested Citation

  • Enrico Marchetti, 1999. "Dynamic Games and Growth Cycles in Unionised Economies," Working Papers in Public Economics 32, Department of Economics and Law, Sapienza University of Roma.
    • Handle: RePEc:sap:wpaper:wp32
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    References listed on IDEAS

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    1. Hoel, Michael, 1978. "Distribution and Growth as a Differential Game between Workers and Capitalists," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 19(2), pages 335-350, June.
    2. Enrico Marchetti, 1998. "Cooperative and Noncooperative Differential Games between Firms and Trade Unions," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 223-242.
    3. C. B. Mulder & F. Ploeg, 1989. "Trade Unions, Investment and Employment in a Small Open Economy: A Dutch Perspective," Palgrave Macmillan Books, in: Joan Muysken & Chris Neubourg (ed.), Unemployment in Europe, chapter 8, pages 200-229, Palgrave Macmillan.
    4. Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-884, December.
    5. Medio,Alfredo & Gallo,Giampaolo, 1995. "Chaotic Dynamics," Cambridge Books, Cambridge University Press, number 9780521484619, September.
    6. repec:bla:econom:v:61:y:1994:i:242:p:179-89 is not listed on IDEAS
    7. Jones, Stephen R. G., 1987. "Union membership and employment dynamics," Economics Letters, Elsevier, vol. 25(2), pages 197-200.
    8. Bruno Chiarini, 1997. "A Dynamic Union Model with Pensioners Membership," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 147-162.
    9. 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.
    10. Lancaster, Kelvin, 1973. "The Dynamic Inefficiency of Capitalism," Journal of Political Economy, University of Chicago Press, vol. 81(5), pages 1092-1109, Sept.-Oct.
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    More about this item

    Keywords

    Trade unions; nonlinear dynamics; differential games; cyclical growth.;
    All these keywords.

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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