Unions, Monetary Shocks and the Labour Market Cycle

Published as an article in: Economic Modelling, 2011, vol. 28, issue 3, pages 1140-1149.This paper provides a new growth model by considering strategic behaviour in the supply of labour. Workers form a labour union with the aim of manipulating wages in their own benefit. We analyse the implications on labor market dynamics at business cycle frequencies of getting away from the price-taking assumption. A calibrated monetary version of the union model does quite a reasonable job in replicating the dynamic features of labour market variables observed in post-war U.S. data.Financial support from Ministerio de Ciencia y Tecnología (Spain) through projects SEJ2007-66592-C03-01-03/ECON is gratefully acknowledged