Abstract
A model of trade-union determined wages is developed which provides an explanation of underemployment based on optimizing behavior. It is shown that fiscal policy will in general affect employment under perfect foresight and immediate wage flexibility. Future consequences of short-run stabilization policies are discussed. Ratchet effects with respect to government expenditure and game-theoretic interdependence between government and trade union behavior are emphasized. If the trade union takes short-run policy measures in order to increase employment as an indication of an employment stabilization rule, the future behavior of the trade union changes and the result may be a decrease in long-run employment.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
