IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v49y2015icp72-80.html
   My bibliography  Save this article

Macroeconomic dynamics in a model with heterogeneous wage contracts

Author

Listed:
  • Matsui, Muneya
  • Yoshimi, Taiyo

Abstract

In the present paper, we constructed a DSGE model with two types of workers with heterogeneous wage contracts, unionized and non-unionized wages, to investigate macroeconomic dynamics and welfare implications. The innovative feature of this paper is to examine direct substitution effects between workers with both types of wage contracts by introducing firms that jointly employ them. It is revealed that the macroeconomic volatility and welfare loss to asymmetric labor productivity shock increased and decreased with the elasticity of substitution between two types of workers and labor unions' bargaining power, respectively. Furthermore, those of monetary policy shock increased with labor unions' bargaining power, which implies that better monetary policy design is more important when unions are more influential.

Suggested Citation

  • Matsui, Muneya & Yoshimi, Taiyo, 2015. "Macroeconomic dynamics in a model with heterogeneous wage contracts," Economic Modelling, Elsevier, vol. 49(C), pages 72-80.
  • Handle: RePEc:eee:ecmode:v:49:y:2015:i:c:p:72-80
    DOI: 10.1016/j.econmod.2015.03.014
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264999315000772
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Per Krusell & Lee E. Ohanian & JosÈ-Victor RÌos-Rull & Giovanni L. Violante, 2000. "Capital-Skill Complementarity and Inequality: A Macroeconomic Analysis," Econometrica, Econometric Society, vol. 68(5), pages 1029-1054, September.
    2. Robert Kollmann, 2004. "Welfare Effects of a Monetary Union: The Role of Trade Openness," Journal of the European Economic Association, MIT Press, vol. 2(2-3), pages 289-301, 04/05.
    3. Antonczyk, Dirk & Fitzenberger, Bernd & Sommerfeld, Katrin, 2010. "Rising wage inequality, the decline of collective bargaining, and the gender wage gap," Labour Economics, Elsevier, vol. 17(5), pages 835-847, October.
    4. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    5. Olivier Blanchard & Jordi Galí, 2010. "Labor Markets and Monetary Policy: A New Keynesian Model with Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 1-30, April.
    6. Dale T. Mortensen, 1982. "The Matching Process as a Noncooperative Bargaining Game," NBER Chapters, in: The Economics of Information and Uncertainty, pages 233-258, National Bureau of Economic Research, Inc.
    7. Thomas, Carlos, 2008. "Search and matching frictions and optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 936-956, July.
    8. Abo-Zaid, Salem, 2013. "Optimal monetary policy and downward nominal wage rigidity in frictional labor markets," Journal of Economic Dynamics and Control, Elsevier, vol. 37(1), pages 345-364.
    9. Goodfriend, Marvin & McCallum, Bennett T., 2007. "Banking and interest rates in monetary policy analysis: A quantitative exploration," Journal of Monetary Economics, Elsevier, vol. 54(5), pages 1480-1507, July.
    10. Mark Gertler & Luca Sala & Antonella Trigari, 2008. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1713-1764, December.
    11. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
    12. Fabrizio Mattesini & Lorenza Rossi, 2008. "Productivity Shocks And Optimal Monetary Policy In A Unionized Labor Market Economy," Manchester School, University of Manchester, vol. 76(5), pages 578-611, September.
    13. Shin, Jong Kook & Subramanian, Chetan, 2014. "Disinflation with labor market frictions," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 1-15.
    14. Dumont, Michel & Rayp, Glenn & Willemé, Peter, 2012. "The bargaining position of low-skilled and high-skilled workers in a globalising world," Labour Economics, Elsevier, vol. 19(3), pages 312-319.
    15. Abbritti, Mirko & Fahr, Stephan, 2013. "Downward wage rigidity and business cycle asymmetries," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 871-886.
    16. Ciccarone, Giuseppe & Giuli, Francesco & Liberati, Danilo, 2014. "Incomplete interest rate pass-through under credit and labor market frictions," Economic Modelling, Elsevier, vol. 36(C), pages 645-657.
    17. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
    18. Chris Papageorgiou & Marianne Saam, 2008. "Two‐level CES Production Technology in the Solow and Diamond Growth Models," Scandinavian Journal of Economics, Wiley Blackwell, vol. 110(1), pages 119-143, March.
    19. Rossi, Lorenza & Mattesini, Fabrizio, 2007. "Productivity Shock and Optimal Monetary Policy in a Unionized Labor Market. Forthcoming: The Manchester School," MPRA Paper 8414, University Library of Munich, Germany, revised 2008.
    20. Mattesini, Fabrizio & Rossi, Lorenza, 2009. "Optimal monetary policy in economies with dual labor markets," Journal of Economic Dynamics and Control, Elsevier, vol. 33(7), pages 1469-1489, July.
    21. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    22. Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, February.
    23. Raissi, Mehdi, 2015. "Flexible inflation targeting and labor market inefficiencies," Economic Modelling, Elsevier, vol. 46(C), pages 283-300.
    24. Weinstein David E., 1994. "United We Stand: Firms and Enterprise Unions in Japan," Journal of the Japanese and International Economies, Elsevier, vol. 8(1), pages 53-71, March.
    25. Dupuy, Arnaud & de Grip, Andries, 2006. "Elasticity of substitution and productivity, capital and skill intensity differences across firms," Economics Letters, Elsevier, vol. 90(3), pages 340-347, March.
    26. Mello, Marcelo, 2008. "Skilled labor, unskilled labor, and economic growth," Economics Letters, Elsevier, vol. 100(3), pages 428-431, September.
    27. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    28. Steven G. Allen, 1984. "Unionized Construction Workers are More Productive," The Quarterly Journal of Economics, Oxford University Press, vol. 99(2), pages 251-274.
    29. Fanti, Luciano & Gori, Luca, 2013. "Efficient bargaining versus right to manage: A stability analysis in a Cournot duopoly with trade unions," Economic Modelling, Elsevier, vol. 30(C), pages 205-211.
    30. Zanetti, Francesco, 2007. "A non-Walrasian labor market in a monetary model of the business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 31(7), pages 2413-2437, July.
    31. Julien Picault, 2013. "Unionization and Labour-market Discrimination: A Closer Look at Non-unionized Workers," LABOUR, CEIS, vol. 27(3), pages 272-287, September.
    32. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
    33. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    34. Magnus Sverke & Johnny Hellgren, 2001. "Exit, Voice and Loyalty Reactions to Job Insecurity in Sweden: Do Unionized and Non‐unionized Employees Differ?," British Journal of Industrial Relations, London School of Economics, vol. 39(2), pages 167-182, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sheen, Jeffrey & Wang, Ben Zhe, 2016. "Animal spirits and optimal monetary policy design in the presence of labour market frictions," Economic Modelling, Elsevier, vol. 52(PB), pages 898-912.

    More about this item

    Keywords

    Business cycles; Wage contract; Nash bargaining;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:49:y:2015:i:c:p:72-80. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.