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Endogenous fluctuations in unionized economies with productive externalities

Rui Coimbra, Teresa Lloyd-Braga () and Leonor Modesto ()

Economic Theory, 2005, vol. 26, issue 3, 629-649

Abstract: We discuss the effects of unions on steady-state multiplicity and welfare, and on the existence of endogenous fluctuations. We consider an OG economy with productive capital externalities and we focus on underemployment equilibria. We find that for wide regions in the parameter space, including an arbitrarily small degree of externalities and a Cobb-Douglas technology, unions increase steady state employment and welfare, and local indeterminacy (sunspots) emerges. Moreover with a CES technology multiplicity of steady states is only possible in the presence of unions. Our results also show that the role of unions in shaping local dynamics and bifurcations depends on technology (externalities and factor’s substitutability). Copyright Springer-Verlag Berlin/Heidelberg 2005

Keywords: Unions; Local indeterminacy and bifurcations; Steady-state welfare; Capital externalities. (search for similar items in EconPapers)
Date: 2005
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