Dynamics and Asymmetric Adjustment in Insider-Outsider Models

F Huizinga and Fabio Schiantarelli

Economic Journal, 1992, vol. 102, issue 415, 1451-66

Abstract: This paper analyzes the time consistent and efficient solution for wages and employment in intertemporal insider-outsider models of bargaining with endogenous membership. When the reservation wage is made endogenous in a general equilibrium context, insider-outsider models can generate a fundamental asymmetry in the adjustment of employment to the steady state. While upturns are gradual, severe downturns are characterized by a sharp drop in employment, obtained by laying off workers. Further reductions in employment are achieved solely through quits. Copyright 1992 by Royal Economic Society.

Date: 1992
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Working Paper: Dynamics and Asymetric Adjustment in Insider-Outsider Models (1992)
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