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Title:Learning of General Equilibrium Effects and the Unemployment Trap PDF Logo
Authors:Gersbach, Hans
Schniewind, Achim
Issue Date:2001
Series/Report no.:IZA Discussion paper series 254
Abstract:We examine wage bargaining when employers and labor unions do not always take all general equilibrium effects into account but learn a steady state. If agents do hardly consider general equilibrium effects, low real wages and low unemployment results. With an intermediate view, when partial equilibrium effects are taken into account, high real wages and unemployment results, which may explain the persistence of high unemployment in Europe. If all general equilibrium effects are incorporated at once, again low real wages and low unemployment results. We thus obtain a hump-shaped relationship between the extend of feedback effects incorporated by the bargaining parties and real wages or unemployment.
Subjects:Labor markets
wage bargaining
learning of general equilibrium effects
unemployment
JEL:L13
D58
E24
J60
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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