Template-type: ReDIF-Paper 1.0
Author-Name: Jean-Pierre Danthine
Author-Name-First: Jean-Pierre
Author-Name-Last: Danthine
Title: The Business Cycle Implications of Reciprocity in Labor Relations
Abstract: We develop a reciprocity-based model of wage determination and incorporate it into a modern dynamic general equilibrium framework. We estimate the model and find that, among potential determinants of wages, rent-sharing (between workers and firms) and wage entitlement (based on wages earned in the past) are important to fit the dynamic responses of output, wages and inflation to various exogenous shocks. Aggregate employment conditions (measuring workers' outside option), on the other hand, are found to play only a negligible role for wage setting. These results are broadly consistent with micro-studies on reciprocity in labor relations but contrast with traditional efficiency wage models which emphasize aggregate labor market variables as the main determinant of wage setting.
Length: 43 pages
Creation-Date: 2010
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2010/working_paper_2010_10
File-Format: text/html
Number: 2010-10
Classification-JEL: E24, E31, E32, E52, J50
Keywords: Efficiency Wages, Reciprocity, Estimated DSGE Models
Handle: RePEc:snb:snbwpa:2010-10