Counter Intuitive Results in a Simple Model of Wage Negotiations

Harold Houba and Gijsbert van Lomwel
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Gijsbert van Lomwel: CentER, Tilburg University

No 98-115/3, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: See also 'Counter Intuitive Results in a Simple Model of Wage Bargaining' in Economic Theory (2001). Volume 17, p. 81-99).

Short-term contracts and exogenous productivity growth are introduced in asimple wage bargaining model. The equilibrium utilities corresponding tomilitant union behaviour are independent of the contract length. The wagedynamics are linear if strike is credible (low wage shares) and nonlinearotherwise (high wage shares). The model can admit two steady state wageshares. The one under strike is not credible exceeds the one under strikeis credible. A wage decrease can occur if strike is credible, but neverwhen strike is not credible. In the limit as time between bargaining roundsvanishes only the first paradox survives.

Keywords: wage bargaining; wage dynamics; chaos; strike (search for similar items in EconPapers)
JEL-codes: C78 J50 (search for similar items in EconPapers)
Date: 1998-10-21
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Related works:
Journal Article: Counter intuitive results in a simple model of wage negotiations (2001)
Working Paper: Counter Intuitive Results in a Simple Model of Wage Negotiations (1998)
Working Paper: Counter Intuitive Results in a Simple Model of Wage Negotiations (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:19980115

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