This paper studies two-stage bargaining in a simple general equilibrium model with a dual labour market. We analyse the case where agreements reached at the central level in the unionized sector extend beyond this sector, which seems to be a characteristic feature of continental European labour...

This paper examines the real cost of disinflation in an economy with high and uncertain inflation. The private sector writes contracts in which wages are indexed to a lagged price index and the exchange rate ("dollarization"). Contracts of fixed and endogenously determined lengths are...