Can Long-Term Wage Accords Promote Growth and Employment?

Martin Zagler

Chapter 5 in Growth and Employment in Europe, 2004, pp 71-89 from Palgrave Macmillan

Abstract: Abstract This chapter presents an innovation-driven endogenous growth model, in which firms and unions bargain over wages. We find that the degree of centralization of the bargaining structure plays a crucial rule in economic performance. Central bargaining, which incorporates the leapfrogging externality incorporated in firm-level bargaining, will yield lower rates of unemployment for a given rate of economic growth. The increase in labor resources will in turn also yield faster growth rates in a corporatist economy. Indeed, when unions focus on issues other than short-term wage increases, they may even outperform the non-unionized economy, because they can internalize the knowledge externality through long-term wage moderation accords.

Keywords: Bargaining Power; Knowledge Externality; Reservation Wage; Balance Growth Path; Innovation Sector (search for similar items in EconPapers)
Date: 2004
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-50632-9_5

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DOI: 10.1057/9780230506329_5

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