EconPapers    
Economics at your fingertips  
 

The Business Cycle Implications of Reciprocity in Labour Relations

Jean-Pierre Danthine and André Kurmann

No 6587, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We develop a reciprocity-based model of wage determination and incorporate it into a modern dynamic general equilibrium framework. We estimate the model and find that, among potential determinants of wage policy, rent-sharing (between workers and firms) and a measure of wage entitlement are critical to fit the dynamic responses of hours, wages and inflation to various exogenous shocks. Aggregate employment conditions (measuring workers' outside option), on the other hand, are found to play only a negligible role in wage setting. These results are broadly consistent with micro-studies on reciprocity in labour relations but contrast with traditional efficiency wage models which emphasize aggregate labour market variables as the main determinant of wage setting. Overall, the empirical fit of the estimated model is at least as good as the fit of models postulating nominal wage contracts. In particular, the reciprocity model is more successful in generating the sharp and significant fall of inflation and nominal wage growth in response to a neutral technology shock.

Keywords: Efficiency wages; Estimated dsge models; Reciprocity (search for similar items in EconPapers)
JEL-codes: E24 E31 E32 E52 J50 (search for similar items in EconPapers)
Date: 2007-11
New Economics Papers: this item is included in nep-bec, nep-cba, nep-dge, nep-lab and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cepr.org/publications/DP6587 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: The business cycle implications of reciprocity in labor relations (2010) Downloads
Working Paper: The Business Cycle Implications of Reciprocity in Labor Relations (2010) Downloads
Working Paper: The Business Cycle Implications of Reciprocity in Labor Relations (2007) Downloads
Working Paper: The Business Cycle Implications of Reciprocity in Labor Relations (2007) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:6587

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP6587

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-19
Handle: RePEc:cpr:ceprdp:6587