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
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Related works:
Working Paper: Wage Bargaining and Capital Accumulation: A Dynamic Version of the Monopoly Union Model (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:121433

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