Resource title

Awareness of General Equilibrium Effects and Unemployment

Resource image

image for OpenScout resource :: Awareness of General Equilibrium Effects and Unemployment

Resource description

We examine wage-bargaining in a two-sector economy when employers and labor unions in each sector are not always aware of all general equilibrium feedback effects. We show analytically that if agents only consider labor demand effects, low real wages and low unemployment result. With an intermediate view, i.e. when partial equilibrium effects within a sector are taken into account, high real wages and unemployment result. If all general equilibrium effects are considered at once, low real wages and low unemployment again result. The assumption that unions and employers? federations are not able to incorporate all feedback effects from other sectors may explain the persistence of high unemployment in Europe.

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/10419/21254

Resource license

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