Government Fiscal Efforts vs. Labour Union Strikes: It Takes Two to Tango
In this paper, we propose a novel policy-game model to analyse the simultaneous interaction between the government and the labour union in a unionised economy. Our model explains how the economic and political interaction between labour unions, concerning wages and strikes, and the government, dealing with unemployment and fiscal policy, gives rise to a long run Cournot-Nash equilibrium. We estimate the policy-game model by a cointegrated Vector Autoregressive system using Italian quarterly data (1960-2009) on government budget surplus (fiscal efforts) and on hours not worked (strikes) and the speed of their long run adjustment. At equilibrium, a rise in unemployment has a negative effect on the level of effort and strike, while a rise in wages has a positive and negative effect on the level of effort and strike, respectively. A phase diagram interpretation of the estimated model is provided and some policy implications are discussed.
|Date of creation:||Jun 2013|
|Date of revision:||Jan 2014|
|Contact details of provider:|| Postal: Via Patara, 3, 47921 Rimini (RN)|
Web page: http://www.rcfea.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Roberto Perotti, 1999. "Fiscal Policy in Good Times and Bad," The Quarterly Journal of Economics, Oxford University Press, vol. 114(4), pages 1399-1436.
- Ondřej Schneider & Jan Zápal, 2005.
"Fiscal Policy in New EU Member States: Go East, Prudent Man!,"
Working Papers IES
76, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
- Ondrej Schneider & Jan Zapal, 2006. "Fiscal Policy in New EU Member States: Go East, Prudent Man!," Post-Communist Economies, Taylor & Francis Journals, vol. 18(2), pages 139-166.
- Ondrej Schneider & Jan Zápal, 2005. "Fiscal Policy in New EU Member States – Go East, Prudent Man!," CESifo Working Paper Series 1486, CESifo Group Munich.
- Chiarini, Bruno & Piselli, Paolo, 1997. "Wage Setting, Wage Curve and Phillips Curve: The Italian Evidence," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(5), pages 545-65, November.
- Fanelli, Luca & Paruolo, Paolo, 2010.
"Speed of adjustment in cointegrated systems,"
Journal of Econometrics,
Elsevier, vol. 158(1), pages 130-141, September.
- Manning, Alan, 1991. "The Determinants of Wage Pressure: Some Implications of a Dynamic Model," Economica, London School of Economics and Political Science, vol. 58(231), pages 325-39, August.
- Troy Davig & Eric M. Leeper, 2009.
"Monetary-Fiscal Policy Interactions and Fiscal Stimulus,"
NBER Working Papers
15133, National Bureau of Economic Research, Inc.
- Davig, Troy & Leeper, Eric M., 2011. "Monetary-fiscal policy interactions and fiscal stimulus," European Economic Review, Elsevier, vol. 55(2), pages 211-227, February.
- Troy A. Davig & Eric M. Leeper, 2009. "Monetary-fiscal policy interactions and fiscal stimulus," Research Working Paper RWP 09-12, Federal Reserve Bank of Kansas City.
- Troy Davig & Eric Leeper, 2009. "Monetary-Fiscal Policy Interactions And Fiscal Stimulus," Caepr Working Papers 2009-010, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
- Davig, Troy & Leeper, Eric M., 2009. "Monetary-Fiscal Policy Interactions and Fiscal Stimulus," CEPR Discussion Papers 7509, C.E.P.R. Discussion Papers.
- Gernot MÃ¼ller & Giancarlo Corsetti & Andre Meier, 2009.
"Fiscal Stimulus with Spending Reversals,"
IMF Working Papers
09/106, International Monetary Fund.
- Jean-Paul Azam & Claire Salmon, 2004.
"Strikes and Political Activism of Trade Unions: Theory and Application to Bangladesh,"
Springer, vol. 119(3_4), pages 311-334, 06.
- Azam, Jean-Paul & Salmon, Claire, 2003. "Strikes and Political Activism of Trade Unions: Theory and Application to Bangladesh," IDEI Working Papers 166, Institut d'Économie Industrielle (IDEI), Toulouse.
- Kennan, John & Wilson, Robert, 1989. "Strategic Bargaining Models and Interpretation of Strike Data," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S87-130, Supplemen.
- Gylfason, Thorvaldur & Lindbeck, Assar, 1994.
"The Interaction of Monetary Policy and Wages,"
Springer, vol. 79(1-2), pages 33-46, April.
- von Hagen, Jurgen & Hughes Hallett, Andrew & Strauch, Rolf, 2002. "Budgetary Consolidation in Europe: Quality, Economic Conditions, and Persistence," Journal of the Japanese and International Economies, Elsevier, vol. 16(4), pages 512-535, December.
- Kåre Vernby, 2007. "Strikes are more common in countries with majoritarian electoral systems," Public Choice, Springer, vol. 132(1), pages 65-84, July.
- Gonzalo, Jesus, 1994. "Five alternative methods of estimating long-run equilibrium relationships," Journal of Econometrics, Elsevier, vol. 60(1-2), pages 203-233.
- Kongsted, Hans Christian, 2005. "Testing the nominal-to-real transformation," Journal of Econometrics, Elsevier, vol. 124(2), pages 205-225, February.
- Ardagna, Silvia, 2004. "Fiscal Stabilizations: When Do They Work and Why," Scholarly Articles 2580047, Harvard University Department of Economics.
- Mumford, Karen, 1993. "A Critical Comparison of Models of Strike Activity," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 55(3), pages 285-312, August.
- Susan S. Yang & Todd B. Walker & Eric M. Leeper, 2010.
"Government Investment and Fiscal Stimulus,"
IMF Working Papers
10/229, International Monetary Fund.
- Paruolo Paolo, 2003. "Common dynamics in I(1) VAR systems," Economics and Quantitative Methods qf0316, Department of Economics, University of Insubria.
- Ardagna, Silvia, 2004. "Fiscal stabilizations: When do they work and why," European Economic Review, Elsevier, vol. 48(5), pages 1047-1074, October.
When requesting a correction, please mention this item's handle: RePEc:rim:rimwps:33_13. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marco Savioli)
If references are entirely missing, you can add them using this form.