Resource title

Learning of General Equilibrium Effects and the Unemployment Trap

Resource image

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Resource description

We examine wage bargaining when employers and labor unions do not always take all general equilibrium effects into account but learn a steady state. If agents do hardly consider general equilibrium effects, low real wages and low unemployment results. With an intermediate view, when partial equilibrium effects are taken into account, high real wages and unemployment results, which may explain the persistence of high unemployment in Europe. If all general equilibrium effects are incorporated at once, again low real wages and low unemployment results. We thus obtain a hump-shaped relationship between the extend of feedback effects incorporated by the bargaining parties and real wages or unemployment.

Resource author

Hans Gersbach, Achim Schniewind

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/21103

Resource license

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