Does intra-firm bargaining matter for business cycle dynamics?

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Discussion Paper Series 1 ; No. 2007,17

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Unemployment: Models, Duration, Incidence, and Job Search ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
• Subject: Strategic wage setting ; search and matching frictions ; business cycle propagation ; Konjunkturtheorie ; Lohnverhandlungen ; Allgemeines Gleichgewicht ; Arbeitsuche ; Matching ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Krause, Michael ; Lubik, Thomas A.
• Event: Veröffentlichung
• (who): Deutsche Bundesbank
• (where): Frankfurt a. M.
• (when): 2007

Further information

• Handle: http://hdl.handle.net/10419/19694
• Last update: 10.03.2025, 11:44 AM CET