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The Wage–Wage‐ . . . ‐Wage–Profit Relation In A Multisector Bargaining Economy

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  • A. J. Julius

Abstract

The equalization of profit rates across industries subject to firm‐level bargaining over wages generates an interindustry wage structure with higher wages in capital‐intensive sectors. The familiar inverse wage–profit relation gives way to a wage–wage‐ . . . ‐wage–profit surface on which the profit rate can vary directly with the wage paid in an individual industry. Institutional changes that decrease workers' bargaining power and increase the incomes of the unemployed tend to compress the wage distribution; these changes draw political support from cross‐class coalitions of low‐wage workers and capital‐intensive firms. Some capital‐using, labor‐saving technical changes that raise capitalists' profits in current prices lower the equilibrium profit rate.

Suggested Citation

  • A. J. Julius, 2009. "The Wage–Wage‐ . . . ‐Wage–Profit Relation In A Multisector Bargaining Economy," Metroeconomica, Wiley Blackwell, vol. 60(3), pages 537-559, July.
    • Handle: RePEc:bla:metroe:v:60:y:2009:i:3:p:537-559
    DOI: 10.1111/j.1467-999X.2008.00355.x
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    References listed on IDEAS

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    1. Gilbert L. Skillman, 1997. "Technical Change and the Equilibrium Profit Rate in a Market with Sequential Bargaining," Metroeconomica, Wiley Blackwell, vol. 48(3), pages 238-261, October.
    2. Mahmood Arai, 2003. "Wages, Profits, and Capital Intensity: Evidence from Matched Worker-Firm Data," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 593-618, July.
    3. Ferguson, Thomas, 1984. "From Normalcy to New Deal: industrial structure, party competition, and American public policy in the Great Depression," International Organization, Cambridge University Press, vol. 38(1), pages 41-94, January.
    4. Reiner Franke, 1999. "Technical Change and a Falling Wage Share if Profits are Maintained," Metroeconomica, Wiley Blackwell, vol. 50(1), pages 35-53, February.
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