Economic Growth with Political Lobbying and Wage Bargaining

European Economic Review, 2007

By setting up a simple Romer-type . Capital accumulation in the theory of long-run growth. In: Barro, R.J. (Ed.), Modern Business Cycle Theory. Harvard University Press, Cambridge, MA] endogenous growth model embodying a political trade union (rather than the traditional economic labor union), this paper explores the effects of unionization on unemployment, growth and welfare by highlighting the essence of internal conflict within the union. It is shown that the conflicting interests between the leadership and membership within the union play a decisive role in the unemployment, growth and welfare effects of unionization. Given the fact that taxation is another potential candidate besides unions in explaining the poor performance of a macro-economy, we re-examine the taxation effects within the growth model with equilibrium unemployment caused by the presence of the trade union and compare our findings with those for the traditional fullemployment growth model. In general, we find that the taxation effects of income and consumption crucially depend not only on the institutional arrangements for taxing unemployment benefits, but also on the way the government budget is balanced. r

Growth and Change, 2001

This paper develops a two‐sector endogenous growth model with a dual labor market caused by the operation of trade unions. Trade unions strive for the extraction of rents from the growth generating imperfectly competitive primary sector. This union behavior results in a non‐competitive wage differential between the primary and secondary (perfectly competitive) sector. How the relationship between growth and unemployment depends on the institutional details of the labor market is analyzed. In general, growth and unemployment are intimately related for two reasons. Unemployment affects the scale of operation of the economy and thereby the growth rate. Growth affects inter‐temporal decisions of workers about where to allocate on the labor market once they are laid off, and thereby it affects equilibrium unemployment.

Journal of Macroeconomics, 1993

The Economic Journal, 2005

Studying a model where trade unions interact with endogenously formed partisan political parties, we explain changing political preferences for and against the unionised labour market regime. We focus on the changes in coalition formation between unskilled and moderately skilled workers, which in turn depend on inequality among workers. When inequality is either very low or very high, moderately skilled workers form a political coalition with unskilled workers to support a unionised labour market regime. In other cases, the economic interest of the moderately skilled workers is more in line with that of highly skilled workers and capital owners to support a competitive labour market regime.

… Working papers. Economics 1996-02-02, 1996

SSRN Electronic Journal, 2000

The paper argues that the form in which collective bargaining is organised might be a decisive factor in determining the performance of modern industrialised economies. The whole literature on corporatism is concerned with showing that the degree of centralisation and coordination in wage determination is a key factor in ensuring either a more or less painful adjustment to adverse economic conditions. In this sense, labour market institutions might assume one of two roles: (i) uncertainty reducers and catalysts of more flexible markets; or (ii) free-rider agents which would only be worried about appropriating product market quasi-rents. The first case seems to be more recurrent in corporatist countries where bargaining is centralised and coordinated. The second, more apparent where bargaining is decentralised and/or intermediate-centralised, is where rent-sharing seems pervasive and wage rigidity a strong possibility.

Journal of Economics Zeitschrift f�r National�konomie, 1997

This paper examines the implications of a rise in the bargaining power of workers on the real wage, income distribution, and the levels of employment and output using a macroeconomic model with monopolistic competition and worker-owner Nash bargaining at the firm level. It thereby provides optimizing microfoundations to Kalecki's macroeconomic analysis of the positive effect on output of a rise in trade-union power, and contrasts it with the neoclassical view based on the diminishing marginal productivity of labor.

The Cato Journal, 2010

The freedom to enter into contracts and to direct the use of economic resources one owns are essential to the operation of a market economy. Allowing employees to form unions to bargain collectively over wages and employment conditions is consistent with economic freedom, and any government intervention preventing unionization would be a violation of economic freedom. Nevertheless, American labor law, especially since the 1930s, has altered the terms and conditions under which unions collectively bargain to heavily favor unions over the firms that hire union labor. Labor law has given unions the power to dictate to employees collective bargaining conditions, and has deprived employees of the right to bargain for themselves regarding their conditions of employment. While unions and economic freedom are conceptually compatible, labor law in the United States, and throughout the world, has restricted the freedom of contract between employees and employers. The effect of unions on growth and prosperity can be examined at two levels. Narrowly, one can examine the effects that union contracts have had on unionized firms and industries. More broadly, one can look at the way that unions have affected labor law. Unions have successfully lobbied to increase the power of unions over firms, which in turn has allowed unions to impose more constraining conditions on

Comparative Political Studies, 1996

Three models have dominated recent research on the relationship between labor unions, wage behavior, and national economic performance: a simple linear model, a parabolic model, and a political model. This article argues that an unemployment-mediated linear model is theoretically preferable. In a context of low unemployment, encompassing labor movements can be expected to restrain wage demands, whereas localized unions have much less incentive to do so. In a context of high unemployment, localized unions should exhibit wage moderation, and the pressure on encompassing unions to restrain wage demands is further accentuated. These four models are assessed as predictors of wage changes, inflation, and misery index levels for 15 industrialized nations over the periods 1960-1973, 1974-1979, and 1980-1990. The linear models outperform the parabolic and political models in each of the latter two time periods. For the mid-to late 1970s the simple linear model performs best, but for the 1980...

Labour Economics, 2012