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| Author: | Houba, H. Lomwel, G. van |
| Title: | Counter intuitive results in a simple model of wage negotiations |
| Journal: | Economic Theory
2001 : VOL. 17:1, p. 81-99 |
| Index terms: | PAY CHAOS STRIKES |
| Language: | eng |
| Abstract: | Short-term contracts and exogenous productivity growth are introduced in a simple wage bargaining model. The equilibrium utilities corresponding to militant union behaviour are independent of the contract length. Necessary and sufficient conditions for monotonic convergence to a unique steady state are derived. Otherwise, cyclic behaviour of wage shares is inevitable. A wage decrease can occur if strike is credible, but never when strike is not credible. In the limit, as time between bargaining rounds vanishes, this paradox survives. This paper derives the union's MUE unity. Then the MUE wage dynamics and conditions for a wage decrease are derived and the long run evolution of wage shares is analyzed. The paper provides a substantial list of references on this subject. |
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