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The Macroeconomic Consequences of Reciprocity in Labor Relations

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  • Jean-Pierre Danthine
  • André Kurmann

Abstract

We develop and analyze a structural model of effciency wages founded on reciprocity. Workers are assumed to face an explicit trade-off between the disutility of providing effort and the psychological benefit of reciprocating the gift of a wage offer above some reference level. The model provides a rationale for rent sharing - a feature that is very much present in the data but absent from previous formulations of the effciency wage hypothesis. This firm-internal perspective on effciency wages has important macroeconomic consequences: rent-sharing considerations promote wage rigidity, internal amplification and asymmetric responses to technology and demand shocks.

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  • Jean-Pierre Danthine & André Kurmann, 2005. "The Macroeconomic Consequences of Reciprocity in Labor Relations," Cahiers de Recherches Economiques du Département d'économie 05.08, Université de Lausanne, Faculté des HEC, Département d’économie.
  • Handle: RePEc:lau:crdeep:05.08
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    Cited by:

    1. Francesco Busato & William Addessi, 2007. "Labor Unions and Asset Prices," Economics Working Papers 2007-05, Department of Economics and Business Economics, Aarhus University.
    2. Danthine, Jean-Pierre & Kurmann, André, 2010. "The business cycle implications of reciprocity in labor relations," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 837-850, October.
    3. Egger, Hartmut & Egger, Peter & Kreickemeier, Udo, 2013. "Trade, wages, and profits," European Economic Review, Elsevier, vol. 64(C), pages 332-350.
    4. Matthieu Chemin & Joost DeLaat & André Kurmann, 2011. "Reciprocity in Labor Relations: Evidence from a Field Experiment with Long-Term Relationships," Cahiers de recherche 1127, CIRPEE.
    5. Addessi, William & Busato, Francesco, 2009. "Fair wages, labor relations and asset returns," Journal of Financial Stability, Elsevier, vol. 5(4), pages 410-430, December.
    6. Ansgar, Rannenberg, 2009. "Disinflation and the NAIRU in a New-Keynesian New-Growth Model (Extended Version)," MPRA Paper 13610, University Library of Munich, Germany.
    7. Hartmut Egger & Udo Kreickemeier, 2010. "Worker‐specific Effects of Globalisation," The World Economy, Wiley Blackwell, vol. 33(8), pages 987-1005, August.
    8. Vasilev Aleksandar, 2020. "Are “fair” wages quantitatively important for business cycle fluctuations in Bulgaria?," Review of Economic Perspectives, Sciendo, vol. 20(1), pages 91-105, March.
    9. Erkki Koskela & Ronnie Schöb, 2009. "A note on internal and external reference in efficiency wage models," Journal of Economics, Springer, vol. 96(1), pages 79-86, January.
    10. Laszlo Goerke, 2020. "An Efficiency-Wage Model with Habit Concerns about Wages," CESifo Working Paper Series 8428, CESifo.
    11. Monica Correa-Lopez & George Choullarakis, 2012. "A Fair Wage Model of Unemployment with Inertia in Fairness Perceptions," Working Papers 1203, BBVA Bank, Economic Research Department.
    12. Ansgar Rannenberg, 2009. "Shocks, Monetary Policy and Institutions: Explaining Unemployment Persistence in "Europe" and the United States," CDMA Working Paper Series 200903, Centre for Dynamic Macroeconomic Analysis.
    13. Matthias Strifler & Thomas Beissinger, 2016. "Fairness Considerations in Labor Union Wage Setting – A Theoretical Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 303-330, July.
    14. Laszlo Goerke, 2021. "Habit formation and wage determination," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(1), pages 61-76, January.
    15. Peter Egger & David Greenaway & Tobias Seidel, 2011. "Rigid labour markets with trade and capital mobility: theory and evidence," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 509-540, May.

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    More about this item

    Keywords

    reciprocity; rent-sharing; effciency wages; wage rigidity;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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