Wage Bargaining and Induced Technical Change in a Linear Economy: Model and Application to the US (1963-2003)
AbstractIn a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargaining a`la Nash (1950). As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy 1964, and more recently Funk 2002). The ag-gregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States (1963-2003). Finally, institutional change, as captured by variations in workers’ bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.
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Bibliographic InfoPaper provided by Economics and Econometrics Research Institute (EERI), Brussels in its series EERI Research Paper Series with number EERI_RP_2009_15.
Length: 17 pages
Date of creation: 08 2009
Date of revision:
Bargaining; Induced Technical Change; Factor Shares; Employment.;
Other versions of this item:
- Tavani, Daniele, 2012. "Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003)," Structural Change and Economic Dynamics, Elsevier, vol. 23(2), pages 117-126.
- Tavani, Daniele, 2009. "Wage Bargaining and Induced Technical Change in a Linear Economy: Model and Application to the US (1963-2003)," MPRA Paper 14635, University Library of Munich, Germany.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
- O31 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
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