Trade Unions, Nonneutrality and Stagflation
The claim that in policy games nonneutrality and a stagflation bias emerge in equilibrium if the unions care about inflation, per se, is discussed. This assumption is shown to be not necessary to obtain a stagflation bias; the same applies to nonneutrality if a government acts in the economy. The question of whether unions should be envisaged as 'institutions' (i.e., interested in variables unrelated to wages and employment) is also addressed. Two model-based alternatives providing 'microeconomic' foundations versus 'macroeconomic' foundations to unions' behavior are presented. The conclusion is that the modeling of unions remains an unsettled problem. Copyright 1997 by Kluwer Academic Publishers
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