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Dynamics and Asymmetric Adjustment in Insider-Outsider Models

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  • Huizinga, F
  • Schiantarelli, Fabio

Abstract

This paper analyzes the time consistent and efficient solution for wages and employment in intertemporal insider-outsider models of bargaining with endogenous membership. When the reservation wage is made endogenous in a general equilibrium context, insider-outsider models can generate a fundamental asymmetry in the adjustment of employment to the steady state. While upturns are gradual, severe downturns are characterized by a sharp drop in employment, obtained by laying off workers. Further reductions in employment are achieved solely through quits. Copyright 1992 by Royal Economic Society.

Suggested Citation

  • Huizinga, F & Schiantarelli, Fabio, 1992. "Dynamics and Asymmetric Adjustment in Insider-Outsider Models," Economic Journal, Royal Economic Society, vol. 102(415), pages 1451-1466, November.
  • Handle: RePEc:ecj:econjl:v:102:y:1992:i:415:p:1451-66
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    References listed on IDEAS

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    1. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66, pages 467-467.
    2. Ermisch, John & Westaway, Peter, 1994. "The Dynamics of Aggregate Consumption in an Open Economy Life Cycle Model," Scottish Journal of Political Economy, Scottish Economic Society, vol. 41(2), pages 113-127, May.
    3. Olivier Jean Blanchard & Stanley Fischer, 1989. "Lectures on Macroeconomics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262022834, January.
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    Cited by:

    1. Postel-Vinay, Fabien, 1998. "Transitional dynamics of the search model with endogenous growth," Journal of Economic Dynamics and Control, Elsevier, vol. 22(7), pages 1091-1115, May.
    2. Boriss Siliverstovs, 2005. "The Bi-parameter Smooth Transition Autoregressive model," Economics Bulletin, AccessEcon, vol. 3(23), pages 1-11.
    3. Stevens, Philip Andrew, 2007. "Skill shortages and firms' employment behaviour," Labour Economics, Elsevier, vol. 14(2), pages 231-249, April.
    4. repec:iab:iabmit:v:29:i:4:p:607-615 is not listed on IDEAS
    5. Kohlbrecher, Britta & Merkl, Christian & Nordmeier, Daniela, 2016. "Revisiting the matching function," Journal of Economic Dynamics and Control, Elsevier, vol. 69(C), pages 350-374.
    6. Guerrazzi, Marco, 2016. "Wage and employment determination in a dynamic insider-outsider model," MPRA Paper 74759, University Library of Munich, Germany.
    7. Van der Linden, Bruno, 1997. "Basic income and unemployment in a unionized economy," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1997014, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 10 Jul 1997.
    8. Nyssens, Marthe & Van der Linden, Bruno, 2000. "Embeddedness, cooperation and popular-economy firms in the informal sector," Journal of Development Economics, Elsevier, vol. 61(1), pages 175-204, February.
    9. Eriksson, Stefan & Gottfries, Nils, 2005. "Ranking of job applicants, on-the-job search, and persistent unemployment," Labour Economics, Elsevier, vol. 12(3), pages 407-428, June.
    10. Pull, Kerstin, 1996. "Übertarifliche Entlohnung : ein Ergebnis vorweggenommener Verhandlungen (Wages above the collectively agreed level: a result of anticipated negotiations)," Mitteilungen aus der Arbeitsmarkt- und Berufsforschung, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 29(4), pages 607-615.
    11. Gottfries, Nils & Westermark, Andreas, 1998. "Nominal wage contracts and the persistent effects of monetary policy," European Economic Review, Elsevier, vol. 42(2), pages 207-223, February.
    12. repec:ebl:ecbull:v:3:y:2005:i:23:p:1-11 is not listed on IDEAS
    13. Kohns, Stephan, 2000. "Different Skill Levels and Firing Costs in a Matching Model with Uncertainty - An Extension of Mortensen and Pissarides (1994)," IZA Discussion Papers 104, Institute for the Study of Labor (IZA).

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