Wages and employment in non-competitive labour markets.

This thesis consists of an introduction and two parts. Part I deals with wage and employment determination under labour bargaining, and is formed of chapters 1 and 2. Part II looks at the role of inflation expectations in macroeconomic models, and is divided into chapters 3, 4 and 5. Chapter 1 sets forth and tests a model of labour bargaining in which the firm and the union are only constrained by the other party's available market alternatives if these are credible. Empirical findings, based on a panel of UK manufacturing firms, show some support for the main predictions of the model. Chapter 2 generalizes the theoretical framework developed in the previous chapter and explores its robustness with respect to changes to some of the assumptions. Chapter 3 assesses the literature on the relationship between inflation expectations, wage and price flexibility and variability of output. Expectations of future price changes may have a destabilizing effect on output if expected inflation moves procyclically. Chapter 4 looks at an overlapping wage contract model and derives analytical conditions for output destabilization to occur as wages and prices become more flexible. A new classical specification of the supply side is then considered, and price rigidity is established to be neither a necessary nor a sufficient condition for increased output volatility. Chapter 5 analyses a monopolistically competitive framework with synchronized wage setting. Explicit consideration of the expected inflation effect makes employment and output variability more likely to increase with contract length