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Dynamic Games and Growth Cycles in Unionised Economies

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  • Enrico Marchetti

Abstract

In this paper we integrate the dynamic models formulated by the microeconomic theory of trade unions and the differential games approach. We demonstrate that the results of the dynamic monopoly union model, elaborated by Kidd and Oswald (1987) and Jones and McKenna (1994), can be obtained as solutions of a Stackelberg differential game between firms and unions under particular assumptions on union’s membership dynamic. We also develop a Nash differential game whose solutions imply a cycle in wage share of product and employment rate which resembles Goodwin’s (1967) cyclical growth path. This result is obtained by use of the Hopf theorem on local bifurcations, under particular hypotheses on the membership dynamics.

Suggested Citation

  • Enrico Marchetti, 1998. "Dynamic Games and Growth Cycles in Unionised Economies," Working Papers 32, University of Rome La Sapienza, Department of Public Economics.
  • Handle: RePEc:sap:wpaper:wp32
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    References listed on IDEAS

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    1. Enrico Marchetti, 1998. "Cooperative and Noncooperative Differential Games between Firms and Trade Unions," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 223-242.
    2. Gottfries, Nils & Horn, Henrik, 1987. "Wage Formation and the Persistence of Unemployment," Economic Journal, Royal Economic Society, vol. 97(388), pages 877-884, December.
    3. Medio,Alfredo & Gallo,Giampaolo, 1995. "Chaotic Dynamics," Cambridge Books, Cambridge University Press, number 9780521484619, May.
    4. Jones, Stephen R G & McKenna, C J, 1994. "A Dynamic Model of Union Membership and Employment," Economica, London School of Economics and Political Science, vol. 61(242), pages 179-189, May.
    5. Jones, Stephen R. G., 1987. "Union membership and employment dynamics," Economics Letters, Elsevier, vol. 25(2), pages 197-200.
    6. Maria Paz Espinosa & Changyong Rhee, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, Oxford University Press, vol. 104(3), pages 565-588.
    7. Bruno Chiarini, 1997. "A Dynamic Union Model with Pensioners Membership," Rivista italiana degli economisti, Società editrice il Mulino, issue 2, pages 147-162.
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    More about this item

    Keywords

    Trade unions; nonlinear dynamics; differential games; cyclical growth.;

    JEL classification:

    • C00 - Mathematical and Quantitative Methods - - General - - - General
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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