Labor Market Regimes and the Effects of Monetary Policy
Douglas A. Hibbs Jr.
Göteborg University - Center for Public Sector Research (CEFOS)
University of Rome I - Department of Public Economics
Giovanni Di Bartolomeo
University of Teramo
August 11, 2004
Journal of Macroeconomics, Vol. 30, pp. 134-156, 2008
In this paper we use a standard multi-union, monopolistic competition model to investigate the qualitative and quantitative responses of inflation and unemployment to monetary policy activism under different institutional arrangements in the labor market, which are defined by the rigidity of nominal wages. We show that the effects of monetary policy on the real economy depend critically on the wage formation regime, and on the ways in which the restrictiveness of policy interacts with product price competition, with union centralization, and with the weight placed on real wages as compared to unemployment in unions' optimal programs. Our interpretation of the results emphasizes how the posture of monetary policy toward inflation influences the strategic calculations that drive union wage setting behavior in different institutional settings.
Number of Pages in PDF File: 30
Keywords: Policy games, monetary policy neutrality, trade unions, monopolistic competition, labor markets
JEL Classification: E52, E58, J51Accepted Paper Series
Date posted: November 18, 2008 ; Last revised: October 13, 2010
© 2013 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo5 in 1.172 seconds