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A Keynesian reformulation of the WS-PS model: Keynesian unemployment and Classical unemployment

Nicolas Piluso () and Gabriel Colletis ()
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Gabriel Colletis: Université de Toulouse I Capitole

Economia Politica: Journal of Analytical and Institutional Economics, 2021, vol. 38, issue 2, No 2, 447-460

Abstract: Abstract The orthodox theory of wage negotiations considers that the trade union monopoly causes a rigidity of real wages which is, itself, the cause of unemployment. The model of this negotiation ("Nash bargaining") only considers situations where negotiations between union and firm succeed. In this article, we attempt to read the WS-PS model from a Keynesian point of view. Our model reflects the fact that successful negotiation is only one case among other situations, including failure where the union expresses a claim that is not necessarily satisfied. Although, in situations close to full employment, there is a bargaining mechanism by which unions and firms reach an agreement, this is not the case in times of massive unemployment. In the latter situation, employment is unilaterally determined by firms, on the basis of previous demand.

Keywords: Bargaining; Trade unions; Wages; Unemployment; Previous demand (search for similar items in EconPapers)
JEL-codes: J01 J60 J88 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1007/s40888-021-00222-y

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