Counter intuitive results in a simple model of wage negotiations

Harold Houba and Gijsbert van Lomwel ()
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Gijsbert van Lomwel: CentER, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, THE NETHERLANDS

Economic Theory, 2001, vol. 17, issue 1, 99 pages

Abstract: Short-term contracts and exogenous productivity growth are introduced in a simple wage bargaining model. The equilibrium utilities corresponding to militant union behaviour are independent of the contract length. Necessary and sufficient conditions for monotonic convergence to a unique steady state are derived. Otherwise, cyclic behaviour of wage shares is inevitable. A wage decrease can occur if strike is credible, but never when strike is not credible. In the limit, as time between bargaining rounds vanishes, this paradox survives.

Keywords: Wage bargaining; Wage dynamics; Chaos; Strike; Cyclic behaviour. (search for similar items in EconPapers)
JEL-codes: C78 J50 (search for similar items in EconPapers)
Date: 2000-11-14
Note: Received: September 3, 1998; revised version: February 10, 2000
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Related works:
Working Paper: Counter Intuitive Results in a Simple Model of Wage Negotiations (1998)
Working Paper: Counter Intuitive Results in a Simple Model of Wage Negotiations (1998)
Working Paper: Counter Intuitive Results in a Simple Model of Wage Negotiations (1998)
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