Dynamics of Unemployment, Vacancies and Real Wages with Trade Unions

Christopher Pissarides

A chapter in Trade Unions, Wage Formation and Macroeconomic Stability, 1986, pp 244-261 from Palgrave Macmillan

Abstract: Abstract This paper considers the response of wages, unemployment and vacancies to shocks when the number of job slots and real wages are determined by a Nash bargain between a firm and a small union. Unemployment and vacancies co-exist because of search considerations. There is a unique “natural” unemployment rate which ensures that every firm-union’s bargained wage is stationary. Shocks that are eventually absorbed by wages cause deviations of unemployment from its natural rate, because the firm-union initial response to a shock is to change vacancies (and possibly wages), which cause changes in unemployment flows via the search process.

Keywords: Wage Rate; Capital Stock; Real Wage; Replacement Ratio; Relative Wage (search for similar items in EconPapers)
Date: 1986
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-08596-5_16

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DOI: 10.1007/978-1-349-08596-5_16

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