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Labor market regimes and the effects of monetary policy

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Author Info
Acocella, Nicola (University of Rome, "La Sapienza")
Di Bartolomeo, Giovanni (University of Rome, "La Sapienza")
Hibbs Jr., Douglas A. () (CEFOS, Göteborg University)

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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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Publisher Info
Paper provided by Göteborg University, 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

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

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Find related papers by JEL classification:
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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References listed on IDEAS
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Full references

Cited by:
(explanations, 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.)

  1. Philip Du Caju & Erwan Gautier & Daphne Momferatou & Melanie Ward-Warmedinger, 2008. "Institutional features of wage bargaining in 23 European countries, the US and Japan," Working Paper Series 974, European Central Bank. [Downloadable!]
    Other versions:
  2. Marcelo Sánchez, 2008. "Monetary stabilisation in a currency union of small open economies," Working Paper Series 927, European Central Bank. [Downloadable!]
  3. Acocella, Nicola & Di Bartolomeo, Giovanni & Pauwels, Wilfried, 2007. "Is there any scope for corporatism in stabilization policies?," MPRA Paper 3584, University Library of Munich, Germany. [Downloadable!]
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