Bargaining and Wage Resistance in an Open Macroeconomic Model.

An open macroeconomic model where wages and employment are determinedby bargaining between a representative firm and a representative union is developed. The model is characterized by a number of regimes; in each of these regimes the effects of changes in the termsof trade and in government expenditure on employment, the real wage and the balance of trade are analyzed. It is of particular interest that under certain circumstances real wage resistance is exhibited-- that is, in response to a terms of trade deterioration, the real wagemay not decline and may even increase. Copyright 1987 by Royal Economic Society.