Awareness of General Equilibrium Effects and Unemployment

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 394

Classification and Topics

• Classification: Wirtschaft ; Computable and Other Applied General Equilibrium Models ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Oligopoly and Other Imperfect Markets ; Mobility, Unemployment, Vacancies, and Immigrant Workers: General
• Subject: Sectoral wage-bargaining ; awareness of general equilibrium effects ; unemployment ; Theorie der Arbeitslosigkeit ; Lohnverhandlungstheorie ; Arbeitsmarkttheorie ; Gleichgewicht ; Arbeitslosigkeit ; Hysteresis ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gersbach, Hans ; Schniewind, Achim
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2001

Further information

• Handle: http://hdl.handle.net/10419/21254
• Last update: 10.03.2025, 11:42 AM CET