Monetary Institutions, Monopolistic Competition, Unionized Labor Markets and Economic Performance

26 Pages Posted: 8 May 2006

See all articles by Fabrizio Coricelli

Fabrizio Coricelli

University of Siena - Department of Political and International Sciences ; Paris School of Economics (PSE); Centre for Economic Policy Research (CEPR)

Alex Cukierman

Tel Aviv University - Eitan Berglas School of Economics; Interdisciplinary Center (IDC) Herzliyah; Centre for Economic Policy Research (CEPR)

Alberto Dalmazzo

University of Siena - Department of Economics

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Abstract

Recent literature on the interactions between labor unions and monetary institutions features either a supply or a demand channel of monetary policy, but not both. This leads to two opposing views about the effects of central bank conservativeness. We evaluate the relative merits of those conflicting views by developing a unified framework. We find that: (i) the effect of conservativeness on employment depends on unions' relative aversion to unemployment versus inflation, and (ii) for plausible values of this relative aversion (and more than one union), social welfare is maximized under a highly conservative central bank. We also evaluate the effects of centralization of wage bargaining and product market competition on unemployment and inflation.

Suggested Citation

Coricelli, Fabrizio and Cukierman, Alex and Dalmazzo, Alberto, Monetary Institutions, Monopolistic Competition, Unionized Labor Markets and Economic Performance. Scandinavian Journal of Economics, Vol. 108, No. 1, pp. 39-63, March 2006, Available at SSRN: https://ssrn.com/abstract=901045 or http://dx.doi.org/10.1111/j.1467-9442.2006.00441.x

Fabrizio Coricelli (Contact Author)

University of Siena - Department of Political and International Sciences ( email )

Via Mattioli, 10
Siena, 53100
Italy

Paris School of Economics (PSE)

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Centre for Economic Policy Research (CEPR)

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Alex Cukierman

Tel Aviv University - Eitan Berglas School of Economics ( email )

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Israel
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Interdisciplinary Center (IDC) Herzliyah ( email )

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Herzliya, 46150
Israel

HOME PAGE: http://www.tau.ac.il/~alexcuk/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Alberto Dalmazzo

University of Siena - Department of Economics ( email )

Piazza S. Francesco, 7
Siena, I-53100
Italy
+39 0577 232 697 (Phone)

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