This paper aims at representing wage bargaining as an optimal control problem. Specifically, assuming that employment follows a stock-adjustment principle towards the stochastic level that maximizes entrepreneurs’ profits, I builds an inter-temporal optimizing model in which the real wage is continuously set by an infinitely-lived arbitrator called in to solve the dispute between workers and employers. This theoretical proposal verifies the natural presumption about real-wage bargaining and suggests that unions are far from having a destabilizing role but, on the contrary, they may well speed up the adjustment to equilibrium. Moreover, I show that when unions do not care about unemployed workers, static bargaining models understate wage negotiation distortions.

Wage Bargaining As An Optimal Control Problem: A Dynamic Version of the Right-to-Manage Model

GUERRAZZI, MARCO
2011

Abstract

This paper aims at representing wage bargaining as an optimal control problem. Specifically, assuming that employment follows a stock-adjustment principle towards the stochastic level that maximizes entrepreneurs’ profits, I builds an inter-temporal optimizing model in which the real wage is continuously set by an infinitely-lived arbitrator called in to solve the dispute between workers and employers. This theoretical proposal verifies the natural presumption about real-wage bargaining and suggests that unions are far from having a destabilizing role but, on the contrary, they may well speed up the adjustment to equilibrium. Moreover, I show that when unions do not care about unemployed workers, static bargaining models understate wage negotiation distortions.
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11567/462317
 Attenzione

Attenzione! I dati visualizzati non sono stati sottoposti a validazione da parte dell'ateneo

Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 3
  • ???jsp.display-item.citation.isi??? 4
social impact