Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/142547
Authors: 
Tavani, Daniele
Year of Publication: 
2009
Series/Report no.: 
EERI Research Paper Series 15/2009
Abstract: 
In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargaining a`la Nash (1950). As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy 1964, and more recently Funk 2002). The ag-gregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral profile of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States (1963-2003). Finally, institutional change, as captured by variations in workers’ bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.
Subjects: 
Bargaining
Induced Technical Change
Factor Shares
Employment
JEL: 
E24
E25
J52
O31
Document Type: 
Working Paper

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