Are labor unions important for business cycle fluctuations? Lessons from Bulgaria

Aleksandar Vasilev

Eurasian Economic Review, 2020, vol. 10, issue 1, No 8, 143-161

Abstract: Abstract In this paper, we investigate the quantitative importance of collective bargaining agreements for the observed fluctuations in Bulgarian labor markets. Following Maffezzoli (Rev Econ Dyn 4:860–892, 2001), we introduce a monopoly union into a real-business-cycle model with government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2018), and compare and contrast it to a model without unions. We find that the sequential bargaining procedure between the monopoly union and the stand-in firm produces an important internal propagation mechanism within the theoretical setup, which allows the monopoly model to fit data better than the alternative framework with perfectly-competitive labor markets.

Keywords: Business cycles; General equilibrium; Labor unions; Indivisible labor; Involuntary unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 J23 J51 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40822-019-00139-9

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