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Short-Run Bargaining, Factors Shares and Growth

Renato Balducci () and Stefano Staffolani ()
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Renato Balducci: Universita' Politecnica delle Marche, Dipartimento di Economia

No 188, Working Papers from Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali

Abstract: In this paper we assume that firms and unions bargain efficiently on wages and employment, whereas work effort is optimally chosen by workers. In the short run, the bargaining process leads to the contract curve. Instead of solving the model and leaving the equilibrium dependent on an exogenous social partners bargaining power, we prefer to leave the wage rate undetermined. Using an endogenous growth model based on human capital, and on the hypothesis that firms invest profits in physical capital while workers optimally allocate their earnings between consumption and investment in human capital, we determine the wage rate that maximizes individual expected utility. Finally, we investigate the relationship between short run behaviour and long run optimality.

Keywords: distribution; endogenous growth; labour share; unemployment (search for similar items in EconPapers)
JEL-codes: D33 J24 O40 (search for similar items in EconPapers)
Pages: 19
Date: 2003-07
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Persistent link: https://EconPapers.repec.org/RePEc:anc:wpaper:188

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