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A theory of wages and labor demand with intra-firm bargaining and matching frictions

Pierre Cahuc 1, 2 François Marque 3 Etienne Wasmer 4
1 X - École polytechnique
2 CREST - Centre de Recherche en Economie et Statistique [Bruz]
3 ID2 - Institut Droit et Economie des Dynamiques en Europe
4 ECON - Département d'économie (Sciences Po)
Abstract : This article provides a model of labor market equilibrium with search and within-firm strategic bargaining.We yield explicit closed form solutions with heterogeneous labor inputs and capital. The solution exhibits overemployment.We show that higher relative bargaining power for some groups of workers may lead to overemployment relative to other groups, with such other groups being underemployed instead if they have a lower relative bargaining power. Similarly, the hold-up problem between capitalists and employees does not necessarily lead to underinvestment in physical capital.
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Journal articles
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Submitted on : Friday, November 5, 2021 - 4:23:21 AM
Last modification on : Sunday, November 7, 2021 - 3:14:51 AM

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  • HAL Id : hal-03415795, version 1
  • SCIENCESPO : 2441/8902

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SCIENCESPO | GENES | ECON-SCPO | UNIV-LORRAINE | X | CREST | CNRS | PARISTECH

Citation

Pierre Cahuc, François Marque, Etienne Wasmer. A theory of wages and labor demand with intra-firm bargaining and matching frictions. International Economic Review, Wiley, 2008, 49 (3), pp.943 - 972. ⟨hal-03415795⟩

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