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Wage Bargaining and Induced Technical Change in a Linear Economy: Model and Application to the US (1963-2003)

Daniele Tavani

MPRA Paper from University Library of Munich, Germany

Abstract: In a simple one-sector, two-class, fixed-proportions economy, wages are set through axiomatic bargaining a la Nash [1950]. As for choice of technology, firms choose the direction of factor augmentations to maximize the rate of unit cost reduction (Kennedy [1964], and more recently Funk [2002]). The aggregate environment resulting by self-interested decisions made by economic agents is described by a two-dimensional dynamical system in the employment rate and output/capital ratio. The economy converges cyclically to a long-run equilibrium involving a Harrod-neutral prole of technical change, a constant rate of employment of labor, and constant input shares. The type of oscillations predicted by the model matches the available data on the United States (1963-2003). Finally, institutional change, as captured by variations in workers' bargaining power, has a positive effect on the rate of output growth but a negative effect on employment.

Keywords: Bargaining; Induced Technical Change; Factor Shares; Employment (search for similar items in EconPapers)
JEL-codes: E25 E24 J52 O31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-lab and nep-mac
Date: 2009-04-02
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Related works:
Journal Article: Wage bargaining and induced technical change in a linear economy: Model and application to the US (1963–2003) (2012) Downloads
Working Paper: Wage Bargaining and Induced Technical Change in a Linear Economy: Model and Application to the US (1963-2003) (2009) Downloads
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