Stability and Dynamics in an Overlapping Generations Economy with Flexible Wage Negotiations

21 Pages Posted: 23 May 2008

See all articles by Erkki Koskela

Erkki Koskela

University of Helsinki - Department of Political and Economic Studies; CESifo (Center for Economic Studies and Ifo Institute); Bank of Finland - Research Department; IZA Institute of Labor Economics

Mikko Puhakka

University of Oulu - Department of Economics

Abstract

We analyze the stability and dynamics of an overlapping generations model with imperfectly competitive labour markets. By focusing on the right-to-manage wage bargaining we assume that wage is negotiated after the capital stock decision. With Cobb-Douglas utility and production functions the steady state is unique and the steady state capital stock depends positively both on the trade union's bargaining power and on the wage elasticity of labour demand. That elasticity depends either on lower decreasing returns to scale and/or more intensive product market competition. Finally, we show that the steady state equilibrium is a saddle.

Keywords: overlapping generations economy, capital accumulation, flexible wage negotiation, stability and dynamics

JEL Classification: J51, C62

Suggested Citation

Koskela, Erkki and Puhakka, Mikko, Stability and Dynamics in an Overlapping Generations Economy with Flexible Wage Negotiations. , Vol. , pp. -, . Available at SSRN: https://ssrn.com/abstract=1136408 or http://dx.doi.org/10.1111/j.0042-7092.2007.00700.x

Erkki Koskela (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland
+358 9 191 8894 (Phone)
+358 9 191 8877 (Fax)

HOME PAGE: http://www.cesifo.de/servlet/page?_pageid=56&_dad=portal30&_schema=PORTAL30&pa_id=7298

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Bank of Finland - Research Department ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Mikko Puhakka

University of Oulu - Department of Economics ( email )

PO Box 4600
FIN-90014 University of Oulu
Finland

Register to save articles to
your library

Register

Paper statistics

Downloads
25
Abstract Views
376
PlumX Metrics