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Labor market regimes and the effects of monetary policy

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  • Acocella, Nicola

    (University of Rome, "La Sapienza")

  • Di Bartolomeo, Giovanni

    (University of Rome, "La Sapienza")

  • Hibbs Jr., Douglas A.

    ()
    (CEFOS, Göteborg University)

Abstract

In this paper we use a standard multi-union, monopolistic competition model to evaluate analytically and numerically the effects of monetary policy on inflation and unemployment under different institutional arrangements in the labor market that are defined by the rigidity of nominal wages. We show that the effects of monetary policy on the real economy depend critically on the wage formation regime, and on the ways in which the restrictiveness of policy interacts with product price competition, wage setting centralization and the utility weight unions place on real wage premiums as compared to unemployment. Our interpretation of the results emphasizes how the posture of monetary policy toward inflation influences the strategic calculations driving unions’ wage setting behavior in different institutional environments.

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Bibliographic Info

Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 145.

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Length: 30 pages
Date of creation: 11 Aug 2004
Date of revision: 22 Apr 2005
Publication status: Published in Journal of Macreconomics, 2008, pages 134-156.
Handle: RePEc:hhs:gunwpe:0145

Contact details of provider:
Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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Keywords: Policy games; monetary policy neutrality; trade unions; monopolistic competition; labor markets;

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Citations

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Cited by:
  1. Sánchez, Marcelo, 2011. "Monetary strictness and labour market outcomes under incomplete transparency," Research in Economics, Elsevier, vol. 65(2), pages 95-99, June.
  2. Du Caju, Philip & Gautier, Erwan & Momferatou, Daphne & Ward-Warmedinger, Melanie, 2008. "Institutional features of wage bargaining in 23 European countries, the US and Japan," Working Paper Series 0974, European Central Bank.
  3. Nicola Acocella & Giovanni Di Bartolomeo, 2005. "Non-neutrality of economic policy: An application of the Tinbergen-Theil’s approach to a strategic context," Macroeconomics 0504035, EconWPA, revised 26 Apr 2005.
  4. Giovanni Di Bartolomeo & Nicola Acocella & Wilfried Pauwels, 2004. "Is There any Scope for Corporatism in Stabilization Policies?," Working Papers 2009.154, Fondazione Eni Enrico Mattei.
  5. Giovanni Di Bartolomeo & Patrizio Tirelli & Nicola Acocella, 2013. "Trend inflation as a workers’ discipline device," Empirica, Springer, vol. 40(2), pages 215-235, May.
  6. Acocella Nicola & Bisio Laura & Di Bartolomeo Giovanni & Pelloni Alessandra, 2011. "Labor market imperfections, real wage rigidities and financial shocks," wp.comunite 0070, Department of Communication, University of Teramo.
  7. Avouyi-Dovi, Sanvi & Fougère, Denis & Gautier, Erwan, 2011. "Wage Rigidity, Collective Bargaining and the Minimum Wage: Evidence from French Agreement Data," IZA Discussion Papers 5835, Institute for the Study of Labor (IZA).
  8. Sánchez, Marcelo, 2008. "Monetary stabilisation in a currency union of small open economies," Working Paper Series 0927, European Central Bank.
  9. Sánchez, Marcelo, 2013. "Monetary accommodation, imperfect central bank transparency and optimal delegation," Economics Letters, Elsevier, vol. 120(3), pages 392-396.
  10. Nicola Acocella & Giovanni Bartolomeo & Wilfried Pauwels, 2010. "Is there any scope for corporatism in macroeconomic policies?," Empirica, Springer, vol. 37(4), pages 403-424, November.

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