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Minimally altruistic wages and unemployment in a matching model with monopsony

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  • Rotemberg, Julio J.

Abstract

A monopsony model with a symmetric equilibrium is developed where posting higher wages reduces employee departures. This monopsony implies that wage changes have small effects on profits so that employer altruism affects wages as well. Even selfish firms act altruistically if workers punish firms that fail to do so. If the marginal utility of income falls sharply with income, the model can explain modest responses of wages to shifts in labor demand. If there are fluctuations in the altruism required by workers, the low correlation of wages and employment and the sizes of the cyclical fluctuations in these two series can be rationalized.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 55 (2008)
Issue (Month): Supplement 1 (October)
Pages: S97-S110

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Handle: RePEc:eee:moneco:v:55:y:2008:i:s1:p:s97-s110

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Web page: http://www.elsevier.com/locate/inca/505566

Related research

Keywords: Matching models Altruism Unemployment Monopsony;

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Cited by:
  1. Danthine, Jean-Pierre & Kurmann, Andre, 2007. "The Business Cycle Implications of Reciprocity in Labour Relations," CEPR Discussion Papers 6587, C.E.P.R. Discussion Papers.
  2. Takanori Ida & Kazuhito Ogawa, 2010. "Inequality aversion, social discount, and time discount rates," Discussion papers e-10-013, Graduate School of Economics Project Center, Kyoto University.
  3. Van Zandweghe, Willem, 2010. "On-the-job search, sticky prices, and persistence," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 437-455, March.

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