Citation

Discussion Paper Details

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Title: Macroeconomic Implications of Insider Power

Author(s): Assar Lindbeck and Dennis J. Snower

Publication Date: July 1989

Keyword(s): Collective Bargaining, Employment, Government Policy, Hysteresis, Negotiations, Unions and Wages

Programme Area(s): Applied Macroeconomics and International Macroeconomics

Abstract: The paper constructs a simple macroeconomic model that contains a labor market in which insiders have power in wage negotiations. Wage and employment decisions are assumed to be made before business conditions are known; thus these decisions depend on both the hiring costs and expected dismissal costs. The paper analyzes the short and long-term implications for the effectiveness of various government policies on production, employment, and pricing. Hysteresis is shown to be a special case in a continuum of symmetric long-term policy effects. A rationale for asymmetric policy effects is presented as well.

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Bibliographic Reference

Lindbeck, A and Snower, D. 1989. 'Macroeconomic Implications of Insider Power'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=331