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Wage Bargaining, Social Security and Capital-Labour Substitution

Author

Listed:
  • de la Croix, D.

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) ; Belgian National Fund for Scientific Research (FNRS))

Abstract

This paper analyses the role played by a social security system in union-firm bargaining and in the resulting wage-productivity spiral. In a first step, we derive the incidence of social security on the bargaining process itself. In a second step, the macromodel is extended to include the budget constraint of the social security system. Both the distributive effect of wage bargaining and the existence of payroll taxes reinforce capital-labour substitution. Moreover, the social security system has a pro-cyclical effect in case of a demand shock and a counter-cyclical effect in case of a wage shock.

Suggested Citation

  • de la Croix, D., 1990. "Wage Bargaining, Social Security and Capital-Labour Substitution," LIDAM Discussion Papers IRES 1990013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1990013
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