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Bargaining, Aggregate Demand and Employment

  • Charpe, Matthieu
  • Kühn, Stefan

This paper depicts the negative impact of a falling labour share caused by reduced bargaining power of workers on aggregate demand and employment. Contrary to standard New Keynesian models, the presence of consumers not participating in financial markets (rule of thumb consumers) causes an immediate negative response of output and employment, which is amplified when the economy faces a lower bound on the nominal interest rate. Additionally, the paper shows that by supporting consumption demand, minimum wages might enhance output and employment.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 40189.

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Date of creation: 19 Jul 2012
Date of revision:
Handle: RePEc:pra:mprapa:40189
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  1. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," NBER Working Papers 7571, National Bureau of Economic Research, Inc.
  2. Kai Christoffel & Keith Kuester & Tobias Linzert, 2009. "The role of labor markets for Euro area monetary policy," Working Papers 09-1, Federal Reserve Bank of Philadelphia.
  3. Lawrence J. Christiano & Mathias Trabandt & Karl Walentin, 2010. "DSGE models for monetary policy analysis," FRB Atlanta CQER Working Paper 2010-02, Federal Reserve Bank of Atlanta.
  4. Alfonso Arpaia & Esther Pérez & Karl Pichelmann, 2009. "Understanding Labour Income Share Dynamics in Europe," European Economy - Economic Papers 379, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  5. Bentolila, Samuel & Saint-Paul, Gilles, 1998. "Explaining Movements in the Labour Share," CEPR Discussion Papers 1958, C.E.P.R. Discussion Papers.
  6. José Emilio Boscá & Javier Ferri & Rafa Doménech, 2009. "Search, Nash Bargaining and Rule of Thumb Consumers," Working Papers 0901, International Economics Institute, University of Valencia.
  7. Gertler, Mark & Trigari, Antonella, 2006. "Unemployment fluctuation with staggered Nash wage bargaining," CFS Working Paper Series 2007/09, Center for Financial Studies (CFS).
  8. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2009. "New Keynesian versus old Keynesian government spending multipliers," CEPR Discussion Papers 7236, C.E.P.R. Discussion Papers.
  9. Romain Ranciere & Michael Kumhof, 2011. "Inequality, Leverage and Crises," 2011 Meeting Papers 1374, Society for Economic Dynamics.
  10. Tom Holden, 2010. "Products, patents and productivity persistence: A DSGE model of endogenous growth," Economics Series Working Papers 512, University of Oxford, Department of Economics.
  11. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2011. "When Is the Government Spending Multiplier Large?," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 78 - 121.
  12. Sala, Luca & Söderström, Ulf & Trigari, Antonella, 2008. "Monetary Policy Under Uncertainty in an Estimated Model with Labour Market Frictions," CEPR Discussion Papers 6826, C.E.P.R. Discussion Papers.
  13. repec:oup:qjecon:v:118:y:2003:i:1:p:1-39 is not listed on IDEAS
  14. Carl Walsh & Federico Ravenna, 2007. "Vacancies, Unemployment, and the Phillips Curve," 2007 Meeting Papers 1014, Society for Economic Dynamics.
  15. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
  16. Philippe Askenazy & Xavier Timbeau, 2003. "Partage de la valeur ajoutée et rentabilité du capital en France et aux États-Unis : une réévaluation ; suivi d'un commentaire de Xavier Timbeau," Économie et Statistique, Programme National Persée, vol. 363(1), pages 167-189.
  17. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  18. Morten O. Ravn & Saverio Simonelli, 2007. "Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States," CSEF Working Papers 182, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  19. Anthony Atkinson & Thomas Piketty & Emmanuel Saez, 2011. "Top Incomes in the Long Run of History," Post-Print halshs-00754557, HAL.
  20. repec:oup:qjecon:v:118:y:2003:i:3:p:879-907 is not listed on IDEAS
  21. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  22. Thomas Lemieux, 2006. "Increasing Residual Wage Inequality: Composition Effects, Noisy Data, or Rising Demand for Skill?," American Economic Review, American Economic Association, vol. 96(3), pages 461-498, June.
  23. Young, Andrew T., 2010. "One of the things we know that ain't so: Is US labor's share relatively stable?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 90-102, March.
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