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Bargaining, Aggregate Demand and Employment

Author

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  • Charpe, Matthieu
  • Kühn, Stefan

Abstract

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.

Suggested Citation

  • Charpe, Matthieu & Kühn, Stefan, 2012. "Bargaining, Aggregate Demand and Employment," MPRA Paper 40189, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:40189
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    File URL: https://mpra.ub.uni-muenchen.de/40189/1/MPRA_paper_40189.pdf
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    References listed on IDEAS

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    1. Ravenna, Federico & Walsh, Carl E., 2008. "Vacancies, unemployment, and the Phillips curve," European Economic Review, Elsevier, vol. 52(8), pages 1494-1521, November.
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    Citations

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    Cited by:

    1. Jan Behringer & Till van Treeck, 2013. "Income distribution and current account: A sectoral perspective," IMK Working Paper 125-2013, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    2. repec:oup:cambje:v:42:y:2018:i:1:p:47-94. is not listed on IDEAS
    3. Christian A Belabed & Thomas Theobald & Till van Treeck, 2018. "Income distribution and current account imbalances," Cambridge Journal of Economics, Oxford University Press, vol. 42(1), pages 47-94.
    4. Damiani, Mirella & Pompei, Fabrizio & Ricci, Andrea, 2012. "Labour share and employment protection in European economies," MPRA Paper 43058, University Library of Munich, Germany.

    More about this item

    Keywords

    Labour share; search and matching; aggregate demand; household heterogeneity;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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