Union objectives and indexation externalities in a monopolistically competitive economy |
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| Authors: | Jonathan G James Phillip Lawler |
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| Institution: | 1. School of Psychiatry, University of New South Wales, Level 1 AGSM Building, Sydney, NSW, 2052 Australia;2. Black Dog Institute, Sydney, NSW, Australia;1. Business School, Sun Yat-Sen University, Guangzhou, China;2. Huddersfield Business School, University of Huddersfield, West Yorkshire, United Kingdom |
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| Abstract: | This paper extends the literature on indexation externalities by analyzing equilibrium and efficient indexation in a unionized economy characterized by a monopolistically competitive goods market. The assumption that union objectives relate to both employment and the real wage implies that union indexation decisions are associated with a negative externality and, as a consequence, the equilibrium degree of indexation is inefficiently high. This feature is characteristic of both passive and activist policy environments. |
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