Resource title

Does intra-firm bargaining matter for business cycle dynamics?

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Resource description

We analyse the implications of intra-firm bargaining for business cycle dynamics in models with large firms and search frictions. Intra-firm bargaining implies a feedback effect from the marginal revenue product to wage setting which leads firms to over-hire in order to reduce workers' bargaining position within the firm. The key to this effect are decreasing returns and/or downward-sloping demand. We show that equilibrium wages and employment are higher in steady state compared to a bargaining framework in which firms neglect this feedback. However, the effects of intra-firm bargaining on adjustment dynamics, volatility and comovement are negligible.

Resource author

Michael Krause, Thomas A. Lubik

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19694

Resource license

Adapt according to the presented license agreement and reference the original author.