Inventory Accumulation, Wages, and Employment

Simon Clark

Economic Journal, 1991, vol. 101, issue 405, 230-38

Abstract: This paper analyzes the effect of inventory accumulation on the outcome of wage and employment agreements between a union and a firm. A two-period model is set up, with bargaining in each period, and the paper analyzes under what circumstances inventories will be held even if demand and production conditions are constant. It is found that inventories have an important strategic role. They bring forward employment and strengthen the bargaining position of the firm in the later period. However, the firm's strategic use of inventories will generally be to the detriment of both parties. Copyright 1991 by Royal Economic Society.

Date: 1991
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