قیمت و دستمزد بنگاه ها تاثیر گذار، سیاست های پولی و اثرات واقعی

Using a microfounded general equilibrium model, this paper shows that when large monopolistic firms or unions perceive even a small influence on aggregate nominal variables, price targeting results in a higher equilibrium output than monetary accommodation. This is because price targeting increases, whereas monetary accommodation decreases, (i) the price elasticity of demand, (ii) the labour elasticity of demand and (iii) the elasticity of the wage with respect to the household's total income. Within this framework, we also show that (a) price targeting combined with wage centralization raise welfare, (b) the standard approximation that no single price or wage setter can affect nominal aggregates is appropriate only when (a) at least a few hundreds of such large firms exist and (b) wage centralization is low.

It is widely accepted in macroeconomic modelling that in economies where a very large number, N, of competitors exist, effects of the order 1/N are ‘negligible’ in relation to the aggregate economy. This practice is a useful simplifying approximation that is based on the assumption of an ‘infinitely large’ number of firms and unions, in which case no single price or wage setter is large enough to perceive an influence on aggregate nominal variables, (see Dixit and Stiglitz, 1977). More recently, a few attempts have been made to examine the qualitative implications of relaxing this standard approximation. For example, in computing the price elasticity of demand of monopolistic competitors, Yang and Heijdra (1993), allow each firm to perceive some influence on the average price index. This results in a lower price elasticity of demand than that derived in the Dixit–Stiglitz model. D'Aspremont et al. (1996) show that in addition to the above effects, individual price decisions can also take into account income effects. Both of these models are focused on product diversity and the optimal degree of entry and so they are confined at the micro level. They show that the inclusion of such effects increases the monopolistic power of price setters, reduces the price elasticity of demand and raises the optimal price. At the macro level, the presence of large price or wage setters has been shown to have significant qualitative implications that are dependent on monetary policy. When firms or unions are large enough to perceive even a small influence on aggregate nominal variables, monetary accommodation is shown to raise equilibrium unemployment by lowering the labour and price elasticities of demand, (Bratsiotis and Martin, 1999, Iversen and Soskice, 2000, Holden, 2003 and Holden, 2005).1 Indeed, as a number of more recent papers show, considering the effects of large monopolistic competitors on aggregate nominal variables can produce some challenging qualitative results about policy implications and the structure of labour markets, (i.e. Guzzo and Velasco, 1999, Coricelli et al., 2006, Coricelli et al., 2004, Holden, 2003, Holden, 2005, Lippi, 2003, Benassi et al., 2002, Vartiainen, 2002, Knell, 2002, Acocella and Di Bartolomeo, 2004, Lawler, 2000 and Lawler, forthcoming). These result are demonstrated to be robust even under the assumption of national expectations or in the absence of nominal rigidities. However, skepticism may still remain as to whether, or the extent to which, any individual price or wage setter can perceive an influence on aggregate nominal variables. This paper builds a microfounded general equilibrium model where workers, organised into unions, receive wages from the firms they work for, as well as a share of aggregate profits by all the firms in the economy. This overcomes the restrictions often imposed on earlier models, that either lacked of microfoundations or were based on the simplified yeoman farmer model (i.e. Bratsiotis and Martin, 1999 and Iversen and Soskice, 2000). This fully general equilibrium model enables us to examine thoroughly the conditions under which influential monopolistic industries and unions can generate real effects through their potential influence on nominal aggregates. In particular, the model contributes to the recent literature in three non-negligible ways. First, it introduces a new source through which influential wage setters can interact with aggregate demand, namely through the effects that wages have on households' non-wage income. The paper argues that given the standard assumption in general equilibrium models, that money transfers and profits of firms are distributed to households, (i.e. that households are share owners), influential unions should set wages in relation to the household's total real income. The latter consists of (i) the gains from being employed, (ii) money transfers and (iii) aggregate profits. 2 We show that the inclusion of the non-wage income effect (ii and iii), result in higher wage claim moderations by ‘large’ monopolistic competitors than shown in the recent related literature, while contradicts the suggestion in the traditional literature that more powerful unions imply less welfare. According to the traditional literature, wage setting by powerful monopoly unions implies additional distortions in the labour markets that result in higher equilibrium real wages and unemployment (or lower equilibrium output). This for example is true for most efficiency wage or insider–outsider wage bargaining models, where firms or unions aim to secure high real wages for their workers or union members at the expense of the “outsiders”. In this model, high wage centralization (particularly in conjunction with price targeting), moves the economy closer to the competitive equilibrium output. This is for two reasons; first, because higher wage centralization embraces a larger part of the total active labour force, (hence of the average economy-wide wage) and this has been shown to moderate wages (i.e. Calmfors and Driffill, 1988). 3 Second, as a few recent papers have shown, when large unions anticipate an effect on aggregate nominal variables, they internalise the adverse effects of their wage claims on their members' real wage income and this results in a moderation of their wage claims. This model shows that in a general equilibrium framework, large unions must incorporate the effect of their wage decisions on both the wage-income and non-wage income of their members. The inclusion of the non-wage income makes the role of monetary policy even more important as it provides another channel of interaction between price and wage setting and aggregate demand and this, under high wage centralization and price targeting, is shown to move the economy closer to the competitive equilibrium output. In this sense, and contrary to the effects of the traditional literature, more powerful (in the sense of larger) unions may be desirable since greater centralization of wage bargaining leads to better coordination of wage decisions. Second, the paper shows that the presence of influential price and wage setters strengthens the case for price targeting. Price targeting is shown to result in higher levels of equilibrium output than those implied by monetary accommodation. Price targeting is shown to reduce the inefficiencies associated with monopolistic competition and raise household welfare beyond the levels implied by monetary accommodation or the standard approximation case, (N = ∞). Under strict price targeting, the equilibrium levels of price, wage and output are shown to approach their efficient outcomes. The third contribution of this paper is an attempt to quantify the significance of such effects. Using numerical simulations, we show that even in the presence of influential monopolistic competitors, the standard approximation of assuming an infinitely large number of firms and unions is still a good one, provided that, (a) at least a few hundreds of such firms operate in the economy and (b) labour markets are decentralized (i.e. union centralization is very low); otherwise, the paper shows that the interaction of monetary policy with price and wage setting can result in non-negligible real effects. The rest of the paper is organised as follows: in Section 2, we introduce a microfounded general equilibrium that incorporates a monetary policy rule. Section 3 introduces the influential price and wage setters; the former is examined in Section 3.1 whereas the latter in Section 3.2. Section 3.3 examines the real effects of monetary policy and simulates the effects of different monetary policy regimes and degrees of wage centralization on household welfare; Section 4 concludes

Governments across the industrial world will frequently pursue talks with influential industry and union representatives. This is particularly true for periods for which governments are keen to pursue an anti-inflationary policy. If large industries or unions can pose no influence on aggregate nominal variables, there would be no call for price or wage restraints by their behalf. This is the rationale of the recent literature that studies potential interactions between monetary policy and large monopolistic price and wage setters. Building on this literature this paper introduces a general equilibrium model that encompasses both the monopolistic union model (Bratsiotis and Martin, 1999, Iversen and Soskice, 2000 and Holden, 2005 etc.) and the simplified yeoman farmer model, (Iversen and Soskice, 2000). By decomposing the effects of wage setting into wage- and non-wage income, this paper shows that the latter effect introduces a new source through which influential unions interact with aggregate demand and this makes unions more sensitive to monetary policy. The latter can result in higher wage moderations by large unions than shown earlier in the literature; these wage moderations are shown to be larger the higher is the degree of wage centralization and the stricter is price targeting. The rationale is that price targeting raises (whereas monetary accommodation reduces) the price elasticity of demand, the labour elasticity of demand and the elasticity of the wage with respect to households' total real income. As a result price targeting combined with high wage centralization raise equilibrium output, reduce the macroeconomic inefficiencies associated with powerful monopolistic competitors and raises household welfare. As the paper shows, the most potential source of such real effects is expected to be the structure of labour markets and particularly the degree of wage centralization. Indeed, our results extend their support to recent work that suggests that the size of such real effects is crucially determined by the structure of wage bargaining in combination with central bank preferences (i.e. Iversen, 1998, Guzzo and Velasco, 1999, Cukierman and Lippi, 1999, Coricelli et al., 2004, Coricelli et al., 2006, Holden, 2003, Lippi, 2003, Lawler, 2000 and Lawler, forthcoming). Similarly, our results also support studies that attempt to explain endogenously the structure of wage bargaining by focusing on how the degree of monetary accommodation in different countries may determine the gains from coordination in wage setting, (i.e. Holden, 2005) or the flexibility in wage contracts (Groth and Johansson, 2002). They may, for example, help explain why countries with a traditionally strict monetary stance or inflation targeting such as the US, and Canada and more recently the UK, have had low centralization in wage setting, whereas Italy, Norway and other Scandinavian countries where monetary policy has been more passive, have had higher degrees of wage centralization. Finally, the paper shows that even in models of influential price and wage setters the standard approximation, of neglecting the effects of individual price and wage setters, is a good one, provided that in the economy considered, (a) more than a few hundreds of influential firms operate at any time and more importantly (b) labour markets are decentralized or wage centralization is very low.