Skip to main content
SpringerLink
Log in
Book cover

Trade Unions, Wage Formation and Macroeconomic Stability pp 120–127Cite as

Palgrave Macmillan

Comment on L. Calmfors and H. Horn, “Classical Unemployment, Accommodation Policies and the Adjustment of Real Wages”

  • Chapter

  • 63 Accesses

Abstract

The aim of this paper is to develop a framework for analyzing the causes of stagflation in an economy with centralized wage setting by a nationwide monopoly union. A basic conclusion is that in such an institutional setting, a full employment policy which accommodates wage disturbances may cause reduction of employment in the private sector and deterioration of the government budget. The model also predicts that the policy has consequences for the allocation of resources between the private and public sector. In fact, the authors develop implicitly a model of long–run public sector growth arising from accommodation policy.

This is a preview of subscription content, log in via an institution.

Chapter
USD   29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD   44.99
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever

Tax calculation will be finalised at checkout

Purchases are for personal use only

Learn about institutional subscriptions

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  • Backus, A. K. & Driffill, E. T.: Reputation and inflation, Queens University, Institute for Economic Research, Discussion Paper No. 560, 1984.

    Google Scholar 

  • Barro, R. & Gordon, D. B.: A positive theory of monetary policy in a natural rate model. Journal of Political Economy, August 1983 a.

    Google Scholar 

  • Barro, R. & Gordon, D. B.: Rules, discretion and reputation. Journal of Monetary Economies, July 1983b.

    Google Scholar 

  • Blair, D. & Crawford, D.: Labor union objectives and collective bargaining. Quarterly Journal of Economics, August 1984.

    Google Scholar 

  • Blyth, C. A.: The interaction between collective bargaining and government policies in selected member countries. Collective Bargaining and Government Policies, OECD, 1979.

    Google Scholar 

  • Bruno, M.: Stagflation in the EEC countries 1973–1981: A cross–section view. In M. Emerson (ed.), Europe’s stagflation. Clarendon Press, Oxford, 1984.

    Google Scholar 

  • Calmfors, L.: Real wages, inflation and unemployment in the open economy. In A. Lindbeck (ed.), Inflation and employment in open economies. North-Holland, 1978.

    Google Scholar 

  • Calmfors, L.: Employment policies, wage formation and trade union behavior in a small open economy. Scandinavian Journal of Economics 84, No. 2, 1982.

    Google Scholar 

  • Calmfors, L. & Horn, H.: Employment policies and centralized wage setting. Institute for International Economic Studies, University of Stockholm, Seminar Paper No. 238, 1983, forthcoming in Economica.

    Google Scholar 

  • Calmfors, L.: Stabilization policy and wage formation in the smaller European economies with strong trade unions. In M. Emerson (ed.), Europe’s stagflation. Clarendon Press, Oxford, 1984a.

    Google Scholar 

  • Calmfors, L.: The roles of stabilization policies and wage setting for macroeconomic stability: the experiences of economies with centralized wage setting. Institute for International Economic Studies, University of Stockholm, Seminar Paper No. 286, 1984b, forthcoming in Kyklos.

    Google Scholar 

  • De Bruyne, G. & Van Rompuy, P.: Wage determination in a unionised economy. Discussion Paper, University of Louvain, 1981.

    Google Scholar 

  • Driffill, E. J.: Can stabilization policy increase the equilibrium unemployment rate. In G. Hutchinson & J. G. Treble (eds.), Recent advances in labour economics. Croom-Helm, London, 1984.

    Google Scholar 

  • Driffill, E. J.: Macroeconomic stabilization policy and trade union behavior as a repeated game. Scandinavian Journal of Economics 87, this issue, 1985.

    Google Scholar 

  • Dunlop, J. T.: Wage determination under trade unions. Macmillan, New York, 1944.

    Google Scholar 

  • Faxén, K.-O.: Incomes policy and centralized wage formation. In A. Boltho (ed.), The European economy: Growth and crisis. Oxford University Press, 1984.

    Google Scholar 

  • Fellner, W.: Towards a reconstruction of macroeconomics: Problems of theory and policy. American Enterprise Institute, 1976.

    Google Scholar 

  • Fellner, W.: The credibility effect and rational expectations: Implications of the Gramlich Study. Brookings Papers on Economic Activity, No. 1, 1979.

    Google Scholar 

  • Fellner, W.: The valid core of rationality hypotheses in the theory of expectations. Journal of Money, Credit and Banking 12, No. 4, 1980.

    Google Scholar 

  • Flanagan, R. J., Soskice, D. W. & Ulman, L.: Unionism, economic stabilization, and incomes policies: European experiences. The Brookings Institution, 1983.

    Google Scholar 

  • Goldfeld, S.: Rules, discretion and reality. American Economic Review, May 1982.

    Google Scholar 

  • Grossman, G.: Union wages, temporary layoffs and seniority. American Economic Review, June 1983.

    Google Scholar 

  • Grubb, D., Layard, R. & Symons, J.: Wages, unemployment and incomes policy. In M. Emerson (ed.), Europe’s stagflation. Clarendon Press, Oxford, 1984.

    Google Scholar 

  • Gylfason, T. & Lindbeck, A.: Macroeconomic consequences of endogenous governments and labor unions. Seminar Paper No. 232, Institute for International Economic Studies, Stockholm, 1982, forthcoming in European Economic Review.

    Google Scholar 

  • Gylfason, T. & Lindbeck, A.: Union rivalry and wages: An oligopolistic approach. Economica, May 1984.

    Google Scholar 

  • Hansen, B.: Economic theory of fiscal policy. Uppsala, 1958.

    Google Scholar 

  • Helpman, E.: Nontraded goods and macroeconomic policy under a fixed exchange rate. Quarterly Journal of Economics, August 1977.

    Google Scholar 

  • Hersoug, T.: Workers vs. government—who adjust to whom? Scandinavian Journal of Economics 87, this issue, 1985.

    Google Scholar 

  • Horn, H. & Persson, T.: Exchange rate policy, wage formation and credibility. Seminar paper No. 325, Institute for International Economic Studies, University of Stockholm, 1985.

    Google Scholar 

  • Jackman, R.: Counter-inflationary policy in a unionized economy with non-synchronized wage setting. Scandinavian Journal of Economics 87, this issue, 1985.

    Google Scholar 

  • Kouri, P.: Macroeconomics of stagflation under flexible exchange rates. American Economic Review, May 1982.

    Google Scholar 

  • Kydland, F. & Prescott, E.: Rules rather than discretion: The inconsistency of optimal plans. Journal of Political Economy, June 1977.

    Google Scholar 

  • Layard, R.: Is incomes policy the answer to unemployment. Economica, August 1982. Lindbeck, A.: The recent slowdown of productivity growth. Economic Journal, March 1983.

    Google Scholar 

  • Oswald, A.: Wage determination in an economy with many trade unions. Oxford Economic Papers, No. 3, 1979.

    Google Scholar 

  • Oswald, A.: The microeconomic theory of the trade union. Economic Journal, September 1982.

    Google Scholar 

  • Oswald, A.: Trade unions and the welfare economics of wages and incomes policy, mimeo. Oxford University, 1984.

    Google Scholar 

  • Oswald, A.: The economic theory of trade unions: An introductory survey. Scandinavian Journal of Economics 87, this issue, 1985.

    Google Scholar 

  • Pencavel, J.: Wages and employment under trade unionism: Microeconomic models and

    Google Scholar 

  • macroeconomic applications. Scandinavian Journal of Economics 87, this issue, 1985.

    Google Scholar 

  • Phelps, E.: Commodity-supply shocks and full-employment monetary policy. Journal of Money, Credit and Banking, May 1978.

    Google Scholar 

  • Rødseth, A.: Macroeconomic policy in a small open economy. Scandinavian Journal of Economics 81, No. 1, 1979.

    Google Scholar 

  • Sachs, J.: Wages, profits, and macroeconomic adjustment: A comparative study. Brookings Papers on Economic Activity, 1979.

    Google Scholar 

  • Sachs, J.: Stabilization policies in the world economy: Scope and skepticism. American Economic Review, May 1982.

    Google Scholar 

  • Sachs, J.: A report on real wages and unemployment in the OECD. Brookings Papers on Economic Activity, 1983.

    Google Scholar 

  • Sampson, A. A.: Employment policy in a model with a rational trade union. Economic Journal 93, 1983.

    Google Scholar 

  • Seidmann, L. D.: Tax-based incomes policy. Brookings Paper on Economic Activity, 1978.

    Google Scholar 

  • Steinherr, A.: Income distribution and employment in the European communities. Commission of the European Communities, mimeo, 1983.

    Google Scholar 

  • Söderström, H. & Viotti, S.: Money wage disturbances and the endogeneity of the public sector in an open economy. In A. Lindbeck (ed.), Inflation and employment in open economies. North-Holland, 1978.

    Google Scholar 

  • Söderström, H.: Union military, external shocks, and the accommodation dilemma. Scandinavian Journal of Economics 87, this issue, 1985.

    Google Scholar 

  • Wallich, H. C. & Weintraub, S.: A tax-based incomes policy. Journal of Economic Issues, No. 5, 1971.

    Google Scholar 

  • Towards full employment and price stability: a report to the OECD by a group of independent experts (The McCracken Report). Paris, 1977.120–124

    Google Scholar 

  • Frisch, H.: Theories of inflation. Cambridge, 1983. Industrial no. 15, p. 623, 1925.

    Google Scholar 

  • Jonung, L. & Wadensjö, E.: The effect of unemployment, inflation and real income growth on government popularity in Sweden. The Scandinavian Journal of Economics 81 (2), 343–354, 1979.

    Google Scholar 

  • Leijonhufvud, A.: What would Keynes have thought of rational expectations?. Chapter 5 in D. Worswich and J. Trevithick (ed.), Keynes and the modern world. Cambridge, 1983.

    Google Scholar 

  • Kirchgässner, G.: Rationales Wählerverhalten und optimale Regierungsverhalten. Dissertation. University of Konstanz, 1976.

    Google Scholar 

  • Paldam, M.: A preliminary survey of the theories and findings on vote and popularity functions. European Journal of Political Research 9 (2), 181–199, 1981.

    Google Scholar 

  • Söderström, H.: Union militancy, external shocks, and the accommodation dilemma. Scandinavian Journal of Economics 87, this issue, 1985.125–127

    Google Scholar 

References

  • Jackman, R., Layard, R. and Pissarides, C: “Policies for Reducing the Natural Rate of Unemployment”, London School of Economics, Centre for Labour Economics, Discussion Paper No. 199, 1984.128–150

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. University of Lund, Sweden

    Lars Jonung

  2. London School of Economics, London, England

    Richard Layard

Authors
  1. Lars Jonung
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Richard Layard
    View author publications

    You can also search for this author in PubMed Google Scholar

Editor information

Editors and Affiliations

  1. Institute for International Economic Studies, University of Stockholm, Sweden

    Lars Calmfors (Associate Professor and Senior Research Fellow) & Henrik Horn (Research Fellow) (Associate Professor and Senior Research Fellow) &  (Research Fellow)

Copyright information

© 1986 The Scandinavian Journal of Economics

About this chapter

Cite this chapter

Jonung, L., Layard, R. (1986). Comment on L. Calmfors and H. Horn, “Classical Unemployment, Accommodation Policies and the Adjustment of Real Wages”. In: Calmfors, L., Horn, H. (eds) Trade Unions, Wage Formation and Macroeconomic Stability. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08596-5_7

Download citation

Publish with us

Policies and ethics

Search

Navigation