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Bargaining, Aggregate Demand and Employment

Listed author(s):
  • 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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File URL: https://mpra.ub.uni-muenchen.de/40189/1/MPRA_paper_40189.pdf
File Function: original version
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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
Handle: RePEc:pra:mprapa:40189
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Web page: https://mpra.ub.uni-muenchen.de

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  2. Morten O. Ravn & Saverio Simonelli, 2008. "Labor Market Dynamics and the Business Cycle: Structural Evidence for the United States," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 743-777, 03.
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  5. N. Gregory Mankiw, 2000. "The Savers-Spenders Theory of Fiscal Policy," American Economic Review, American Economic Association, vol. 90(2), pages 120-125, May.
  6. Sala, Luca & Söderström, Ulf & Trigari, Antonella, 2008. "Monetary policy under uncertainty in an estimated model with labor market frictions," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 983-1006, July.
  7. 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.
  8. Nicholas Kaldor, 1955. "Alternative Theories of Distribution," Review of Economic Studies, Oxford University Press, vol. 23(2), pages 83-100.
  9. Christoffel, Kai & Kuester, Keith & Linzert, Tobias, 2009. "The role of labor markets for euro area monetary policy," European Economic Review, Elsevier, vol. 53(8), pages 908-936, November.
  10. Cogan, John F. & Cwik, Tobias & Taylor, John B. & Wieland, Volker, 2010. "New Keynesian versus old Keynesian government spending multipliers," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 281-295, March.
  11. Boscá, J.E. & Doménech, R. & Ferri, J., 2011. "Search, Nash bargaining and rule-of-thumb consumers," European Economic Review, Elsevier, vol. 55(7), pages 927-942.
  12. 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.
  13. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  14. Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, 02.
  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. Michael Kumhof & Romain Rancière & Pablo Winant, 2015. "Inequality, Leverage, and Crises," American Economic Review, American Economic Association, vol. 105(3), pages 1217-1245, March.
  17. 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.
  18. Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2010. "DSGE Models for Monetary Policy Analysis," Handbook of Monetary Economics,in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 7, pages 285-367 Elsevier.
  19. Bentolila Samuel & Saint-Paul Gilles, 2003. "Explaining Movements in the Labor Share," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-33, October.
  20. 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.
  21. Alfonso Arpaia & Esther Pérez & Karl Pichelmann, 2009. "Understanding Labour Income Share Dynamics in Europe," European Economy - Economic Papers 2008 - 2015 379, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  22. 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.
  23. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
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