Learning of General Equilibrium Effects and the Unemployment Trap

Hans Gersbach and Achim Schniewind ()
Additional contact information
Achim Schniewind: Heidelberg University

No 254, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We examine wage bargaining when employers and labor unions do not always take all general equilibrium effects into account but learn a steady state. If agents do hardly consider general equilibrium effects, low real wages and low unemployment results. With an intermediate view, when partial equilibrium effects are taken into account, high real wages and unemployment results, which may explain the persistence of high unemployment in Europe. If all general equilibrium effects are incorporated at once, again low real wages and low unemployment results. We thus obtain a hump-shaped relationship between the extend of feedback effects incorporated by the bargaining parties and real wages or unemployment.

Keywords: Labor markets; wage bargaining; learning of general equilibrium effects; unemployment (search for similar items in EconPapers)
JEL-codes: D58 E24 J60 L13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2001-02
New Economics Papers: this item is included in nep-lab
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://docs.iza.org/dp254.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp254

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().