Central Wage Setting under Multiple Technological Equilibria: A Mechanism for Equilibrium Elimination

Mark A. Roberts

Scandinavian Journal of Economics, 2002, vol. 104, issue 2, 301-320

Abstract: Instituting an initial round of centralized wage setting before an ultimate round of decentralized wage bargaining may actually raise employment. A general multi–equilibrium model is set up with strategic complementarities in the implementation of a new technology through aggregate demand spillovers. In this model, centralized wage setting to establish an outside option wage, which is selectively binding on lo–tech firms, may achieve the “big push” to a hi–tech general equilibrium with higher employment, output, wages and profits.

Date: 2002
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