TITLE:
Union Influence on Wage and Change in Employment Rate in an Overlapping Generations Economy
AUTHORS:
Toyoki Matsue
KEYWORDS:
Employment Dynamics, Unions, Unemployment Insurance, Overlapping Generations Model
JOURNAL NAME:
Theoretical Economics Letters,
Vol.8 No.12,
September
19,
2018
ABSTRACT: The effect of labor market institutions on the
unemployment rate has been widely studied in macroeconomic dynamics. Union
influence is one of the most important issues in the labor market institutions.
Thus, this study investigates the effects of union influence on wages with
regard to employment dynamics using an overlapping generations model with
closed economy. We assume a wage setting equation that is discussed in the
existing literature and we consider an economy in which unemployment exists.
The model shows that high upward pressure on wages leads to low employment
rates not only in the steady state but also on the equilibrium path.