On Union Preferences and Labour Market Models: Insiders and Outsi ders
Alan Carruth and
Economic Journal, 1987, vol. 97, issue 386, 431-45
This paper constructs a model of trade-union behavior in which there is a distinction between "insiders" and "outsiders." This is used to examine one of the most troublesome issues in macroeconomic theory, namely, the extent to which a rise in aggregate demand might generate wage increases rather than growth in employment. A generalization of the most widely used union utility function is presented. The analysis reveals the conditions under which insiders will agree to let outsiders into employment, derives two-step wage preferences, and proves a new result on wage rigidity. Copyright 1987 by Royal Economic Society.
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