Union Activity and Economic Resilience

Assar Lindbeck and Dennis Snower

No 114, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: The paper analyzes how the influence of labour unions over wage contracts may make an economy less "resilient". Loss of resilience is depicted in two conceptually independent ways: (i) the tendency of exogenous variations in unemployment to become perpetuated and (ii) the possibility that such swings may give rise to a wage-unemployment ratchet. In this manner, the analysis attempts to provide an explanation of why unemployment rates in Europe and the United States have displayed an upward trend over the past fifteen years and why the United States recovered much more speedily from the recession of the early 1980s than did most European economies.

Keywords: Economic Resilience; Insider-Outsider Analysis; Labour Unions; Unemployment; Union Activity; Wage-Unemployment Movements (search for similar items in EconPapers)
Date: 1986-06
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