Bargaining, Aggregate Demand and Employment

Matthieu Charpe and Stefan Kühn

MPRA Paper from University Library of Munich, Germany

Abstract: This paper depicts the negative impact of a falling labour share caused by reduced bargaining power of workers on aggregate demand and employment. Contrary to standard New Keynesian models, the presence of consumers not participating in financial markets (rule of thumb consumers) causes an immediate negative response of output and employment, which is amplified when the economy faces a lower bound on the nominal interest rate. Additionally, the paper shows that by supporting consumption demand, minimum wages might enhance output and employment.

Keywords: Labour share; search and matching; aggregate demand; household heterogeneity (search for similar items in EconPapers)
JEL-codes: E21 E24 E32 (search for similar items in EconPapers)
Date: 2012-07-19
New Economics Papers: this item is included in nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Bargaining, Aggregate Demand and Employment (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:40189

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