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In search of a macroeconomic theory of wage determination, the agnostic reader should be puzzled by the apparent … contradiction between two influential theories. On one hand, in the standard search-matching theory with wage bargaining, hiring … overemployment or to under-employment compared with the first-best. On the other hand, in Stole and Zwiebel's theory of intrafirm …
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We present a model of wage contract violation that implies a possibility of multiple equilibria in the level of arrears. Positive feedback arises because each employer's arrears affect the costs of late payment faced by other employers operating in the same labor market, resulting in a network...
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Usually cointegrated VAR models of wage formation are analysed in a wage-price setup. However, theoretical wage bargaining models provide the background for a wage-employment setup. The two relations of interest are the labour demand equation from the profit maximizing firms and the (bargained)...
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