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Undominated Wage Rates in a Unionized Economy

Author

Listed:
  • Hans Jørgen Jacobsen

    (Institute of Economics, University of Copenhagen)

  • Christian Schultz

    (Institute of Economics, University of Copenhagen)

Abstract

This paper analyses a dynamic general equilibrium macro model where consumers are divided into workers and capitalists. Goods and money markets are assumed to be competitive, whereas the wage rate is determined by negotiation between a trade union and an employer's union. Unions know the structure of the economy and act to maximize member's utility. Two different limiting cases are investigated. In the first unions are "short sighted" caring about immediate utility consequences, in the second they are "long sighted" caring about utilities in stationary states. In both cases the solution concept used is cooperative, wages chosen by the unions should be undominated, i.e. there must not exist another wage rate leading to higher utility for both parties. The resulting equilibria are analyzed. In both cases results are that full employment equilibria always exist, and in some economies unemployment equilibria exist. Characterization results are given.

Suggested Citation

  • Hans Jørgen Jacobsen & Christian Schultz, 1988. "Undominated Wage Rates in a Unionized Economy," Discussion Papers 88-06, University of Copenhagen. Department of Economics.
    • Handle: RePEc:kud:kuiedp:8806
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    More about this item

    Keywords

    labour force; collective bargaining in the private sector; trade unions;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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