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Can Long-Term Wage Accords Promote Growth and Employment?

In: Growth and Employment in Europe

Author

Listed:
  • Martin Zagler

    (Vienna University of Economics and Business Administration)

Abstract

This chapter presents an innovation-driven endogenous growth model, in which firms and unions bargain over wages. We find that the degree of centralization of the bargaining structure plays a crucial rule in economic performance. Central bargaining, which incorporates the leapfrogging externality incorporated in firm-level bargaining, will yield lower rates of unemployment for a given rate of economic growth. The increase in labor resources will in turn also yield faster growth rates in a corporatist economy. Indeed, when unions focus on issues other than short-term wage increases, they may even outperform the non-unionized economy, because they can internalize the knowledge externality through long-term wage moderation accords.

Suggested Citation

  • Martin Zagler, 2004. "Can Long-Term Wage Accords Promote Growth and Employment?," Palgrave Macmillan Books, in: Growth and Employment in Europe, chapter 5, pages 71-89, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-0-230-50632-9_5
    DOI: 10.1057/9780230506329_5
    as

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