Author: Toyoki Matsue
The effect of labor market institutions on the unemployment rate has been widely studied in macroeconomic dynamics. Union influence is one of the most important issues in the labor market institutions. Thus, this study investigates the effects of union influence on wages with regard to employment dynamics using an overlapping generations model with closed economy. We assume a wage setting equation that is discussed in the existing literature and we consider an economy in which unemployment exists. The model shows that high upward pressure on wages leads to low employment rates not only in the steady state but also on the equilibrium path.
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