Unions, Increasing Returns and Endogenous Fluctuations

Arbeitspapier

We analyse the implications of unions (efficient bargaining) for multiplicity of stationary states and welfare, local indeterminacy, bifurcations and endogenous fluctuations (deterministic and stochastic). We use an overlapping generations model with external increasing returns to scale, where capital is the unique asset. We find that a slight increase in unions power may increase the levels of capital, employment and the welfare of all agents at the steady state. However multiple steady states may exist. Moreover, our results show that increasing returns to scale are a necessary condition for the emergence of deterministic endogenous fluctuations. However, we find that union's bargaining power can dramatically influence the local stability of the system. In fact, while an increase in the bargaining power of unions reduces the scope for local indeterminacy, the emergence of endogenous fluctuations, through Hopf bifurcations may become more likely when unions are present. Therefore, if the relevant trajectory exhibits endogenous fluctuations, steady state welfare is no longer the unique important element from a social point of view. In this case, whether unions are 'good' institutions or not may well depend on the trade off between efficiency and intergenerational equity that society is willing to take.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 229

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Trade Unions: Objectives, Structure, and Effects ; Welfare Economics: General ; Externalities
• Subject: Unions ; increasing returns ; endogenous fluctuations ; Steady-State-Wachstum ; Konjunktur ; Overlapping Generations ; Tarifpolitik ; Gewerkschaftlicher Organisationsgrad ; Skalenertrag ; Wohlfahrtseffekt ; Chaostheorie ; Theorie ; Hopf bifurcation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Modesto, Leonor ; Lloyd-Braga, Teresa ; Coimbra, Rui
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2000

Further information

• Handle: http://hdl.handle.net/10419/21076
• Last update: 10.03.2025, 11:43 AM CET