Efficient Bargaining Under Labor Market Segmentation in a Macroeconomic Model

Oliver Claas
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Oliver Claas: Bielefeld University

Chapter Chapter 4 in Essays on Wage Bargaining in Dynamic Macroeconomics, 2019, pp 109-153 from Springer

Abstract: Abstract This chapter studies the implications of a segmented labor market with efficient wage–employment bargaining on the internal labor market and a competitive external labor market on the temporary equilibrium of a closed monetary macroeconomy of the AS–AD type with a government sector and fiat money. Workers have identical preferences, those on the internal labor market are represented by a labor union. There is no mobility between the labor markets. Union power and union density impact the functional income distribution, but neither affect the individual employment levels nor the aggregate employment level and the aggregate supply function. The wage on the internal labor market is above the wage on the external labor market if and only if the profit share of total revenue is smaller than under a fully competitive labor market. Unique temporary equilibria exist for all combinations of union power and union density. The chapter provides a complete comparative-statics analysis showing in particular a negative price effect of union power and a positive price effect of union density. Single-labor-market models with a fully competitive or a fully unionized labor market as in Chap. 2 are special or limiting cases of the segmented-labor-market model.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:spr:lnechp:978-3-319-97828-4_4

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DOI: 10.1007/978-3-319-97828-4_4

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