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A Keynesian reformulation of the WS-PS model: Keynesian unemployment and Classical unemployment

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  • Nicolas Piluso

    (Université Toulouse III Paul Sabatier)

  • Gabriel Colletis

    (Université de Toulouse I Capitole)

Abstract

The orthodox theory of wage negotiations considers that the trade union monopoly causes a rigidity of real wages which is, itself, the cause of unemployment. The model of this negotiation ("Nash bargaining") only considers situations where negotiations between union and firm succeed. In this article, we attempt to read the WS-PS model from a Keynesian point of view. Our model reflects the fact that successful negotiation is only one case among other situations, including failure where the union expresses a claim that is not necessarily satisfied. Although, in situations close to full employment, there is a bargaining mechanism by which unions and firms reach an agreement, this is not the case in times of massive unemployment. In the latter situation, employment is unilaterally determined by firms, on the basis of previous demand.

Suggested Citation

  • Nicolas Piluso & Gabriel Colletis, 2021. "A Keynesian reformulation of the WS-PS model: Keynesian unemployment and Classical unemployment," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 38(2), pages 447-460, July.
    • Handle: RePEc:spr:epolit:v:38:y:2021:i:2:d:10.1007_s40888-021-00222-y
    DOI: 10.1007/s40888-021-00222-y
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    Cited by:

    1. Sara Boni & Francesco Ravazzolo, 2022. "A Structural Analysis of Unemployment-Generating Supply Shocks with an Application to the US Pharmaceutical Industry," BEMPS - Bozen Economics & Management Paper Series BEMPS94, Faculty of Economics and Management at the Free University of Bozen.

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    More about this item

    Keywords

    Bargaining; Trade unions; Wages; Unemployment; Previous demand;
    All these keywords.

    JEL classification:

    • J01 - Labor and Demographic Economics - - General - - - Labor Economics: General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General
    • J88 - Labor and Demographic Economics - - Labor Standards - - - Public Policy

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