Counter intuitive results in a simple model of wage negotiations

B-Tier
Journal: Economic Theory
Year: 2001
Volume: 17
Issue: 1
Pages: 81-99

Authors (2)

Harold Houba (Tinbergen Instituut) Gijsbert van Lomwel (not in RePEc)

Score contribution per author:

1.005 = (α=2.01 / 2 authors) × 1.0x B-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

Short-term contracts and exogenous productivity growth are introduced in a simple wage bargaining model. The equilibrium utilities corresponding to militant union behaviour are independent of the contract length. Necessary and sufficient conditions for monotonic convergence to a unique steady state are derived. Otherwise, cyclic behaviour of wage shares is inevitable. A wage decrease can occur if strike is credible, but never when strike is not credible. In the limit, as time between bargaining rounds vanishes, this paradox survives.

Technical Details

RePEc Handle
repec:spr:joecth:v:17:y:2001:i:1:p:81-99
Journal Field
Theory
Author Count
2
Added to Database
2026-02-02