Trade Unions, Non-Binding Wage Agreements, and Capital Accumulation

Michael Devereux and Ben Lockwood

Working Paper from Economics Department, Queen's University

Abstract: This paper provides a counterexample to some recent results of Grout (1984) which state that in a bargaining situation without binding wage agreements, the capital stock will be biased downwards. In a general equilibrium setting, this result may be reversed. The argument is built around a simple Diamond-type overlapping generations model where the young work and old own both capital and shares in firms. A move from binding to non-binding wage contracts may increase the capital stock in this environment. A rise in trade-union power will generally increase the capital stock and reduce the speed of the economy's adjustment.

Keywords: trade unions; wages; economic equilibrium; enterprises; labour (search for similar items in EconPapers)
Pages: 21 pages
Date: 1989
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Citations: View citations in EconPapers (14)

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Journal Article: Trade unions, non-binding wage agreements, and capital accumulation (1991)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:743

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