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.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
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 - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E25 - Macroeconomics and Monetary Economics - - Macroeconomics: 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
This paper has been announced in the following NEP Reports:
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.:
- McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Funk, Peter, 2002.
"Induced Innovation Revisited,"
London School of Economics and Political Science, vol. 69(273), pages 155-71, February.
- Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
- Amit Bhaduri, 2006. "Endogenous economic growth: a new approach," Cambridge Journal of Economics, Oxford University Press, vol. 30(1), pages 69-83, January.
- Daron Acemoglu, 2000.
"Labor- and Capital- Augmenting Technical Change,"
NBER Working Papers
7544, National Bureau of Economic Research, Inc.
- Summers, Lawrence H, 1988.
"Relative Wages, Efficiency Wages, and Keynesian Unemployment,"
American Economic Review,
American Economic Association, vol. 78(2), pages 383-88, May.
- Lawrence H. Summers, 1989. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," NBER Working Papers 2590, National Bureau of Economic Research, Inc.
- Nelson H. Barbosa-Filho & Lance Taylor, 2006. "Distributive And Demand Cycles In The Us Economy-A Structuralist Goodwin Model," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 389-411, 07.
- A. J. Julius, 2005. "Steady-State Growth And Distribution With An Endogenous Direction Of Technical Change," Metroeconomica, Wiley Blackwell, vol. 56(1), pages 101-125, 02.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
- Shah, Anup & Desai, Meghnad, 1981. "Growth Cycles with Induced Technical Change," Economic Journal, Royal Economic Society, vol. 91(364), pages 1006-10, December.
- Daniele Tavani & Peter Flaschel & Lance Taylor, 2011. "Estimated non-linearities and multiple equilibria in a model of distributive-demand cycles," International Review of Applied Economics, Taylor and Francis Journals, vol. 25(5), pages 519-538, October.
- van der Ploeg, F., 1987. "Growth cycles, induced technical change, and perpetual conflict over the distribution of income," Journal of Macroeconomics, Elsevier, vol. 9(1), pages 1-12.
- Roemer,John E., 1989. "Analytical Foundations of Marxian Economic Theory," Cambridge Books, Cambridge University Press, number 9780521347754, October.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julia van Hove).
If references are entirely missing, you can add them using this form.