Wage Bargaining, Holdout, and Inflation
In many countries, it is customary that production continues under the terms of the old contract during wage negotiations (holdout), unless a work stoppage is initiated. This paper analyzes a model where the workers deliberately work less efficiently during a holdout, while the firm reduces bonus payments. If a holdout is more costly to the firm than to the workers, the wage bargaining will result in a nominal wage increase. The model implies a Phillips curve that consists of two vertical parts; one with high inflation and low unemployment and one with low inflation and high unemployment. Copyright 1997 by Royal Economic Society.
Volume (Year): 49 (1997)
Issue (Month): 2 (April)
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