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Macroeconomic Implications of Insider Power

Author

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  • Lindbeck, Assar
  • Snower, Dennis J.

Abstract

The paper constructs a simple macroeconomic model that contains a labor market in which insiders have power in wage negotiations. Wage and employment decisions are assumed to be made before business conditions are known; thus these decisions depend on both the hiring costs and expected dismissal costs. The paper analyzes the short and long-term implications for the effectiveness of various government policies on production, employment, and pricing. Hysteresis is shown to be a special case in a continuum of symmetric long-term policy effects. A rationale for asymmetric policy effects is presented as well.

Suggested Citation

  • Lindbeck, Assar & Snower, Dennis J., 1989. "Macroeconomic Implications of Insider Power," CEPR Discussion Papers 331, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:331
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    Cited by:

    1. Aidt, Toke & Tzannatos, Zafiris, 2001. "The cost and benefits of collective bargaining : a survey," Social Protection and Labor Policy and Technical Notes 23309, The World Bank.

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