The Cost of Social Pacts

18 Pages Posted: 5 Jul 2013

See all articles by Nicola Acocella

Nicola Acocella

University of Rome I - Department of Methods and Models for Economics, Territory and Finance (MEMOTEF)

Giovanni Di Bartolomeo

University of Teramo

Date Written: July 2013

Abstract

The paper deals with the various institutions capable of improving the macroeconomic performance in a situation of conflict between unions and the government. In particular, we discuss the difficulty of agreeing with a cooperative solution and the need for some kind of explicit or implicit compensation for unions in signing a social pact. A cooperative solution encapsulating the operation of the different mechanisms designed to cope with the conflict and including the various elements of compensation is presented. The model shows that the amount of the explicit compensation depends on the extent of the strategic conflict between the parties as well as on the factors that determine the implicit compensation (i.e., unions’ inflation aversion, partisanship) or are partial substitutes for it (i.e., the conservative central banker). Finally, the role played by external anticipated and unanticipated shocks is also discussed.

Keywords: conservativeness, partisanship, side payments, social pacts, unions

JEL Classification: E00, E58, E61, J50, J51

Suggested Citation

Acocella, Nicola and Di Bartolomeo, Giovanni, The Cost of Social Pacts (July 2013). Bulletin of Economic Research, Vol. 65, Issue 3, pp. 238-255, 2013, Available at SSRN: https://ssrn.com/abstract=2290048 or http://dx.doi.org/10.1111/j.1467-8586.2011.00405.x

Nicola Acocella (Contact Author)

University of Rome I - Department of Methods and Models for Economics, Territory and Finance (MEMOTEF) ( email )

Via del Castro Laurenziano 9
Roma, Roma 00161
Italy
+390649766359 (Phone)

HOME PAGE: http://www.memotef.uniroma1.it/newdip/utenti/acocellanicola/

Giovanni Di Bartolomeo

University of Teramo ( email )

Campus Coste S. Agostino
Via R. Balzarini 1, Località Colleparco
Teramo, TE 64100
Italy

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