Growth and Employment in Europe: Sustainability and Competitiveness, Department of Economics, WU (Wirtschaftsuniversität Wien)
Distribution and Globalization: A Wage Bargaining Model
Abstract: This paper develops a model of distribution to analyze the
effects of neoliberal globalization on labor in the developing countries.
Distribution is determined via wage bargaining by workers, price setting by
firms, and improvements in productivity. The full model has the nature of a
Post-Keynesian conflicting claims model for an open economy under the
pressure of globalization. The conflict inflation is extended to an open
economy case with imported inputs, where the pass through effect of the
depreciation of the local currency also becomes important. The variables
that reflect the macroeconomic effects of globalization are modeled as
parameters that affect the bargaining power of labor on two levels: the
first group is related with the interaction with the global economy, i.e.
international trade, and FDI. The second is about the domestic fiscal and
monetary policy variables, which are particularly related to the specific
form that globalization takes in the era of neoliberalism, i.e. government
expenditures, and the interest rate. Then the model is solved for
distribution of income, i.e. the wage share, thus a reduced form of the
model is obtained, which is estimated in a companion paper to test whether
the change in the international and domestic macroeconomic environment has
affected the decline the labor’s share.
Keywords: Labor’s share, neoliberal policies, globalization; (follow links to similar papers)
JEL-Codes: E240,; O150,; O190,; J230,; J300,; F020; (follow links to similar papers)
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