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A Multiple Equilibria Model with Intrafirm Bargaining and Matching Frictions

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  • Julie Beugnot
  • Mabel Tidball

Abstract

In this paper, we combine a matching model derived from Pissarides (2000) in the case of large .rms with monopolistic competition on the product market and the model of intra.rm bargaining à la Stole and Zwiebel (1996). Moreover, we allow for increasing returns to scale in the aggregate production function leading to multiple equilibria. Then, we study the dynamics of such a framework for various size of returns to scale and propose numerical simulations. Finally, we show how the dynamical properties are altered in the case of multiple equilibria compared to that of a unique equilibrium and illustrate the issues of economic policy design in presence of multiple equilibria.

Suggested Citation

  • Julie Beugnot & Mabel Tidball, 2009. "A Multiple Equilibria Model with Intrafirm Bargaining and Matching Frictions," Working Papers 09-11, LAMETA, Universtiy of Montpellier, revised Oct 2009.
  • Handle: RePEc:lam:wpaper:09-11
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    References listed on IDEAS

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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521570176, May.
    3. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 118(3), pages 879-907.
    4. Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and Labor Market Outcomes," Working Papers 02.08, Swiss National Bank, Study Center Gerzensee.
    5. Pierre Cahuc & Francois Marque & Etienne Wasmer, 2008. "A Theory Of Wages And Labor Demand With Intra-Firm Bargaining And Matching Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(3), pages 943-972, August.
    6. Cahuc, Pierre & Wasmer, Etienne, 2001. "Labor Market Efficiency, Wages and Employment when Search Frictions Interact with Intrafirm Bargaining," IZA Discussion Papers 304, Institute for the Study of Labor (IZA).
    7. Monique Ebell & Christian Haefke, 2009. "Product Market Deregulation and the U.S. Employment Miracle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 12(3), pages 479-504, July.
    8. Cahuc, Pierre & Wasmer, Etienne, 2001. "Does Intrafirm Bargaining Matter In The Large Firm'S Matching Model?," Macroeconomic Dynamics, Cambridge University Press, vol. 5(05), pages 742-747, November.
    9. Mortensen, Dale T, 1999. "Equilibrium Unemployment Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 889-914, November.
    10. Cooper,Russell, 1999. "Coordination Games," Cambridge Books, Cambridge University Press, number 9780521578967, May.
    11. Lars A. Stole & Jeffrey Zwiebel, 1996. "Intra-firm Bargaining under Non-binding Contracts," Review of Economic Studies, Oxford University Press, vol. 63(3), pages 375-410.
    12. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    13. Maiju Johanna Perälä, 2008. "Increasing returns in the aggregate: fact or fiction?," Journal of Economic Studies, Emerald Group Publishing, vol. 35(2), pages 112-153, May.
    14. Guillaume Rocheteau, 1999. "Can an Unemployment Insurance System Generate Multiple Natural Rates?," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 379-387, August.
    15. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
    16. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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    Cited by:

    1. Dossche, Maarten & Lewis, Vivien & Poilly, Céline, 2014. "Employment, hours and optimal monetary policy," Working Paper Series 1713, European Central Bank.
    2. O'Farrell, Rory, 2012. "The effect of international firm mobility on wages and unemployment," Labour Economics, Elsevier, vol. 19(6), pages 931-943.

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