Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97230
Authors: 
Böhm, Volker
Claas, Oliver
Year of Publication: 
2014
Series/Report no.: 
Working Papers, Center for Mathematical Economics 502
Abstract: 
This paper analyzes the implications of right-to-manage wage bargaining between a producers' syndicate and a workers' union representing finite numbers of identical members in a monetary macroeconomic model of the AS-AD type with government activity. At given prices and price expectations, nominal wages are set according to a Nash bargaining agreement. Producers then choose labor demand and commodity supply to maximize profits at given output prices. The commodity market clears in a competitive fashion. Unique temporary equilibria are shown to exist for each level of relative power of the union. These equilibria may exhibit under- or overemployment, depending on the level of union power. The paper presents a complete comparative-statics analysis of the temporary equilibrium, in particular of the role of union power on employment, wages, and income distribution, including a variety of different qualitative features compared to the situation under efficient bargaining. These differences arise primarily from a supply-side effect of union power under the right-to-manage approach as compared to a demand-side effect under efficient bargaining. In addition, the dynamic evolution under perfect foresight is monotonic with two coexisting balanced steady states, one of which is stable under certain conditions. These properties are qualitatively identical to those under efficient bargaining or under perfect competition.
Subjects: 
Collective Bargaining
Nash Bargaining
Union Power
Aggregate Supply-Aggregate Demand
Government Deficits
Perfect Foresight
Dynamics
Stability
JEL: 
C78
D61
E24
E25
E31
E42
J52
Document Type: 
Working Paper

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