The Politics of Wage Decisions. Union Cooperation or Harassment

The paper ask why trade unions' attitudes to stabilization policy can be colored by political considerations, as suggested for example by Argentina's history of bitter divisions over Peronism. Wage decisions are considered as part of a game between the government and trade unions, where income distribution can be altered by political parties and a successful stabilization program increases the chances the incumbent will be reelected. The main result is that trade unions may cooperate with a friendly government, and harass a non-friendly government, in a polarized political climate.