Competitive Wage Cycles with Imperfect Output Market Competition

Leo Kaas and P Madden

Centre for Growth and Business Cycle Research Discussion Paper Series from Economics, The University of Manchester

Abstract: We consider a model of a sector in which the same set of oligopolistic firms faces a common labour supply constraint. The wage is given in the short run, adjusting competitively in the longer run. When the costs of job creation are low relative to the degree of output market power, there exists no wage that clears the labour market in the short run, and at some wages there are two equilibria, one with involuntary unemployment and one with unfilled vacancies. The competitive wage dynamics produces a cycle with persistent labour market disequilibrium and recurrent periods of involuntary unemployment.

Keywords: involuntary unemployment; imperfect competition; mulitple equilibria (search for similar items in EconPapers)
Pages: 22 pages
Date: 2002
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Working Paper: Competitive Wage Cycles with Imperfect Output Market Competition (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:man:cgbcrp:19

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