Government Fiscal Efforts vs. Labour Union Strikes. Strategic Substitutes or Complements?
Quaderni - Working Paper DSE N° 1013
22 Pages Posted: 24 Jun 2015
Date Written: June 23, 2015
Abstract
To unveil the strategic interaction between the government and the labour union in a unionised economy, a policy-game model is estimated by cointegrated Vector Autoregressive system using Italian quarterly data (1960-2009) on government budget surplus (fiscal efforts), hours not worked (strikes), unemployment and real wages. The long-run cointegration relationships are interpreted as the players' reaction functions and the long-run equilibrium as the equilibrium of the game. The identification of the long-run cointegration relationships allows indeed to determine if efforts and strikes are strategic complements or strategic substitutes. Finally, speed of long-run adjustment provides insights about the effectiveness of government and labour union strategies.
Keywords: Fiscal efforts, strikes, strategic substitutes, policy-game, speed of adjustment
JEL Classification: E62, J51, C72, C54, C32
Suggested Citation: Suggested Citation