THE WAGE–WAGE‐... ‐WAGE–PROFIT RELATION IN A MULTISECTOR BARGAINING ECONOMY

A. J. Julius

Metroeconomica, 2009, vol. 60, issue 3, 537-559

Abstract: The equalization of profit rates across industries subject to firm‐level bargaining over wages generates an interindustry wage structure with higher wages in capital‐intensive sectors. The familiar inverse wage–profit relation gives way to a wage–wage‐ . . . ‐wage–profit surface on which the profit rate can vary directly with the wage paid in an individual industry. Institutional changes that decrease workers' bargaining power and increase the incomes of the unemployed tend to compress the wage distribution; these changes draw political support from cross‐class coalitions of low‐wage workers and capital‐intensive firms. Some capital‐using, labor‐saving technical changes that raise capitalists' profits in current prices lower the equilibrium profit rate.

Date: 2009
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