The properties of WS-PS model are modified when trade activity is explicitly modelled. We introduce transaction costs on the output market to capture multiplicity whatever the degree of returns to scale. The price setting curve can become downward-sloping in the unemployment rate-real wage space. Trading externalities reinforce the effect of strategic complementarities between firms, leading to multiple unemployment equilibria. Moreover, a positive shock on the bargaining power of workers decreases the unemployment rate and the real wage at the low equilibrium, but increases both of them at the high equilibrium.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number
2006-6.
Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Layard, Richard & Nickell, Stephen, 1986.
"Unemployment in Britain,"
Economica,
London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
[Downloadable!] (restricted)
Howitt, Peter & McAfee, R Preston, 1987.
"Costly Search and Recruiting,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 89-107, February.
[Downloadable!] (restricted)