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Union objectives and indexation externalities in a monopolistically competitive economy

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  • James, Jonathan G.
  • Lawler, Phillip

Abstract

This paper extends the literature on indexation externalities by analyzing equilibrium and efficient indexation in a unionized economy characterized by a monopolistically competitive goods market. The assumption that union objectives relate to both employment and the real wage implies that union indexation decisions are associated with a negative externality and, as a consequence, the equilibrium degree of indexation is inefficiently high. This feature is characteristic of both passive and activist policy environments.

Suggested Citation

  • James, Jonathan G. & Lawler, Phillip, 2010. "Union objectives and indexation externalities in a monopolistically competitive economy," Research in Economics, Elsevier, vol. 64(1), pages 28-35, March.
  • Handle: RePEc:eee:reecon:v:64:y:2010:i:1:p:28-35
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