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Theoretical Foundations of Asymmetries in the Wage-Employment Relationship

Author

Listed:
  • De Villé, Philippe

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Van der Linden, Bruno

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

Abstract

In recent discussions on wage policies and their effects on employment it has been argued that the elasticity of employment to real wages can be different in case of wage increases and wage decreases. The paper analyses first the conceptual and methodological issues raised by this assertion. It then explores in a comparative static framework some of the possible theoretical foundations that might justify the existence of an asymmetric employment to real wages relationship in the presence of infinitesimal shocks. A non-Walrasian quantity-rationing model and two bargaining models are discussed. In all cases an asymmetric adjustment of employment emerges under assumptions.

Suggested Citation

  • De Villé, Philippe & Van der Linden, Bruno, 1993. "Theoretical Foundations of Asymmetries in the Wage-Employment Relationship," LIDAM Discussion Papers IRES 1993013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    • Handle: RePEc:ctl:louvir:1993013
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    File URL: https://sites.uclouvain.be/econ/DP/IRES/9313.pdf
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    Keywords

    macroeconomic theory; asymmetries;

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