Unemployment and wage flexibility in an evolutionary setting

Authors

  • Jorge Eduardo de Castro Soromenho Universidade de São Paulo. Faculdade de Economia, Administração e Contabilidade. Departamento de Economia
  • Jaylson Jair da Silveira Universidade Federal de Santa Catarina; Departamento de Ciências Econômicas

DOI:

https://doi.org/10.1590/S0101-41612011000200003

Keywords:

keynesian model, unemployment, evolutionary games

Abstract

We make use of an evolutionary game approach to study the relation between wage flexibility and unemployment in an economy with decentralized wage bargains. In our model, labor unions pick a nominal wage out of a finite set with cardinality in each period, while firms choose employment levels that maximize their profits. We are able to show that: 1) the economy presents multiple equilibria, some are characterized by homogeneity of nominal wages (pure strategy equilibrium) and others by heterogeneity of nominal wages (mixed strategy equilibrium); 2) the medium-run equilibrium is selected by a social learning process, given by a replicator dynamics; and 3) the selected medium-run equilibrium may not be the full employment equilibrium.

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References

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Published

30-06-2011

Issue

Vol. 41 No. 2 (2011)

Section

Não definida

License

Copyright (c) 2011 Jorge Eduardo de Castro Soromenho

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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

By submitting an article, the author authorizes its publication and attests that it has not been submitted to any other journal. The original article is considered final. Articles selected for publication are proofread for grammatical and orthographic errors. The journal does not pay rights for published articles. The Institute of Economic Research from the School of Economics, Business and Accounting of the University of São Paulo (Instituto de Pesquisas Econômicas da Faculdade de Economia, Administração e Contabilidade da Universidade de São Paulo) owns the journal's copyright.

How to Cite

Soromenho, J. E. de C., & Silveira, J. J. da. (2011). Unemployment and wage flexibility in an evolutionary setting. Estudos Econômicos (São Paulo), 41(2), 269-296. https://doi.org/10.1590/S0101-41612011000200003