Endogenous fluctuations in unionized economies with productive externalities |
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Authors: | Rui Coimbra Teresa Lloyd-Braga Leonor Modesto |
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Affiliation: | (1) FCEE, Universidade Católica Portuguesa, Palma de Cima, 1649-023 Lisboa, Portugal;(2) FCEE, Universidade Católica Portuguesa, and CEPR, Palma de Cima, 1649-023 Lisboa, Portugal;(3) FCEE, Universidade Católica Portuguesa, and IZA, Palma di Cima, 1649-023 Lisboa, Portugal |
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Abstract: | Summary. We discuss the effects of unions on steady-state multiplicity and welfare, and on the existence of endogenous fluctuations. We consider an OG economy with productive capital externalities and we focus on underemployment equilibria. We find that for wide regions in the parameter space, including an arbitrarily small degree of externalities and a Cobb-Douglas technology, unions increase steady state employment and welfare, and local indeterminacy (sunspots) emerges. Moreover with a CES technology multiplicity of steady states is only possible in the presence of unions. Our results also show that the role of unions in shaping local dynamics and bifurcations depends on technology (externalities and factor s substitutability).Received: 16 January 2002, Revised: 18 March 2004, JEL Classification Numbers: E32, J51, D60, D62. Correspondence to: Leonor ModestoThis paper is a much revised version of our former working paper Unions, Increasing Returns and Endogenous Fluctuations . Financial support from Fundação para a Ciência e Tecnologia under the POCTI, is gratefuly acknowledged. |
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Keywords: | Unions Local indeterminacy and bifurcations Steady-state welfare Capital externalities. |
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