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Undominated Wage Rates in a Unionized Overlapping Generations Economy

Listed author(s):
  • Hans Jørgen Jacobsen

    (Institute of Economics, University of Copenhagen)

  • Christian Schultz

    (Institute of Economics, University of Copenhagen)

An overlapping generations, macro model where consumers are divided into workers and capitalists is analysed. In each period the wage rate is negotiated between an employers' union and a trade union. Other prices adjust competitively. The solution concept used is cooperative, the wage rate chosen by unions should be undominated, i.e. there must not exist another wage rate leading to higher utilities for both workers and capitalists. The resulting one period equilibria, relative Pareto optima, RPO, and also stationary equilibria, stationary relative Pareto optima, SRPO are analysed. Results are that full employment (S)RPO always exist and in some economies unemployment (S)RPO also exist. Sufficient conditions for the latter to be the case are stated and the existence of economies fulfilling these conditions is demonstrated.

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Paper provided by University of Copenhagen. Department of Economics in its series Discussion Papers with number 90-12.

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Length: 17 pages
Date of creation: May 1990
Publication status: Published in: European Economic Review, 1991, 35(6) pp. 1255-1275
Handle: RePEc:kud:kuiedp:9012
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