Individual Wage Bargaining and Business Cycles

Monique Ebell

No 755, 2006 Meeting Papers from Society for Economic Dynamics

Abstract: This paper examines the business cycle properties of business cycle models with search frictions and wage bargaining which rely not only on labor, but also on capital in the production function. In the presence of capital, the choice of bargaining framework matters, even under perfect competition and constant returns to scale. In particular, under individual bargaining, the welfare theorems do not hold, due to a hold-up effect in capital and a hiring externality, so that solving a planner's problem is not sufficient. I examine the business cycle properties of the decentralized model with individual bargaining under alternative calibration strategies

Keywords: Business Cycles; Wage Bargaining; Search Frictions; Capital (search for similar items in EconPapers)
JEL-codes: E3 J2 J3 (search for similar items in EconPapers)
Date: 2006
New Economics Papers: this item is included in nep-bec, nep-dge and nep-mac
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