Wage bargaining and capital accumulation: A dynamic version of the monopoly union model

Marco Guerrazzi

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, I explore the relationship between wage bargaining and capital accumulation by developing a differential game in which a monopolistic union sets the wage of its members by taking as given the optimal employment strategy of a representative firm and the way in which capital is evaluated over time. Under the assumption that investment amounts to a constant share of produced output, I show that a meaningful open-loop Stackelberg equilibrium requires the union to be more patient than the firm. Moreover, relying on some numerical simulations, I show that although adjustments towards the steady-state equilibrium occur through damped oscillations, after an initial period of decline the model predicts a stable union wage premium.

Keywords: Monopoly union model; Capital accumulation; Binding wage contracts; Differential games; Open-loop Stackelberg equilibrium (search for similar items in EconPapers)
JEL-codes: J31 J51 J52 (search for similar items in EconPapers)
Date: 2024-07-11
New Economics Papers: this item is included in nep-gth and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/121433/1/MPRA_paper_121433.pdf original version (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:pra:mprapa:121433

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter ().