Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003)
In a simple one-sector, two-class, fixed-proportions economy operating at full capacity, wages are set through generalized axiomatic bargaining à laNash (1950). As for choice of technology, firms choose the direction of factor-augmenting innovations to maximize the rate of unit cost reduction (Kennedy, 1964; Funk, 2002). The aggregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches qualitatively the available data on the United States (1963–2003). Institutional change, as captured by variations in workers’ bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- van der Ploeg, F., 1987. "Growth cycles, induced technical change, and perpetual conflict over the distribution of income," Journal of Macroeconomics, Elsevier, vol. 9(1), pages 1-12.
- Daron Acemoglu, 2000.
"Labor- and Capital- Augmenting Technical Change,"
NBER Working Papers
7544, National Bureau of Economic Research, Inc.
- Emmanuel M. Drandakis & Edmond S. Phelps, 1965. "A Model of Induced Invention, Growth and Distribution," Cowles Foundation Discussion Papers 186, Cowles Foundation for Research in Economics, Yale University.
- Summers, Lawrence H, 1988.
"Relative Wages, Efficiency Wages, and Keynesian Unemployment,"
American Economic Review,
American Economic Association, vol. 78(2), pages 383-88, May.
- Lawrence H. Summers, 1988. "Relative Wages, Efficiency Wages, and Keynesian Unemployment," NBER Working Papers 2590, National Bureau of Economic Research, Inc.
- Nelson H. Barbosa-Filho & Lance Taylor, 2006. "Distributive And Demand Cycles In The Us Economy-A Structuralist Goodwin Model," Metroeconomica, Wiley Blackwell, vol. 57(3), pages 389-411, 07.
- Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
- Shah, Anup & Desai, Meghnad, 1981. "Growth Cycles with Induced Technical Change," Economic Journal, Royal Economic Society, vol. 91(364), pages 1006-10, December.
- A. J. Julius, 2005. "Steady-State Growth And Distribution With An Endogenous Direction Of Technical Change," Metroeconomica, Wiley Blackwell, vol. 56(1), pages 101-125, 02.
- Amit Bhaduri, 2006. "Endogenous economic growth: a new approach," Cambridge Journal of Economics, Oxford University Press, vol. 30(1), pages 69-83, January.
- Roemer,John E., 1989. "Analytical Foundations of Marxian Economic Theory," Cambridge Books, Cambridge University Press, number 9780521347754, June.
- Bhaduri, Amit & Marglin, Stephen, 1990. "Unemployment and the Real Wage: The Economic Basis for Contesting Political Ideologies," Cambridge Journal of Economics, Oxford University Press, vol. 14(4), pages 375-93, December.
- Funk, Peter, 2002.
"Induced Innovation Revisited,"
London School of Economics and Political Science, vol. 69(273), pages 155-71, February.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Daniele Tavani & Peter Flaschel & Lance Taylor, 2011. "Estimated non-linearities and multiple equilibria in a model of distributive-demand cycles," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(5), pages 519-538, October.
- McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
When requesting a correction, please mention this item's handle: RePEc:eee:streco:v:23:y:2012:i:2:p:117-126. See general information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.