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1994•Bulletin of Economic ResearchRequires access

UNEMPLOYMENT IN AN EQUILIBRIUM MODEL WITH BARGAINING*

Nicolaas Groenewold

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Abstract

ABSTRACT This paper develops a model which embeds the Nash‐equilibrium version of McDonald and Solow's (1981) wage‐bargaining model into an otherwise standard static equilibrium macro model. Equilibrium unemployment is possible. Real shocks to demand result in pro‐cyclical employment and anti‐cyclical real wage movements while money shocks are neutral. This is in some contrast to the results obtained by McDonald and Solow.

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ABSTRACT This paper develops a model which embeds the Nash‐equilibrium version of McDonald and Solow's (1981) wage‐bargaining model into an otherwise standard static equilibrium macro model. Equilibrium unemployment is possible. Real shocks to demand result in pro‐cyclical employment and anti‐cyclical real wage movements while money shocks are neutral. This is in some contrast to the results obtained by McDonald and Solow.

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Available abstract

ABSTRACT This paper develops a model which embeds the Nash‐equilibrium version of McDonald and Solow's (1981) wage‐bargaining model into an otherwise standard static equilibrium macro model. Equilibrium unemployment is possible. Real shocks to demand result in pro‐cyclical employment and anti‐cyclical real wage movements while money shocks are neutral. This is in some contrast to the results obtained by McDonald and Solow.

Key concepts: Economics, Wage bargaining, Unemployment, Bargaining problem, Macro, Wage, Keynesian economics, Macroeconomics

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