Working Paper: CEPR ID: DP937
Authors: Huw David Dixon; Michele Santoni
Abstract: We consider a three sector small open economy, with a monopolistic non-traded sector, a competitive traded good sector, and a capital goods sector. In both the consumer good sectors, there are enterprise unions that bargain sequentially over wages and employment as in Manning (1987). This approach encompasses the standard monopoly union, right to manage and efficient bargain models. We consider first the effects of bargaining strengths at each stage on overall macroeconomic equilibrium. Here we find strong general equilibrium spillover effects: bargaining strengths in one sector affecting the other sectors. Second, we consider the influence of the bargaining process on the welfare analysis of fiscal policy.
Keywords: imperfect competition; trade unions; small open economy
JEL Codes: E6; F4; J5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stronger union bargaining power over wages (J50) | Lower employment (J63) |
| Stronger union bargaining power over wages (J50) | Lower output (E23) |
| Greater union power over employment (J58) | Higher employment (J68) |
| Greater union power over employment (J58) | Higher output (E23) |
| Nature and degree of imperfect competition (L13) | Welfare effects of fiscal policy (H31) |