A Wage Structure Theory of Inflation, Industrial Conflicts and Trade Unions.

The wage structure theory in this paper has three levels: (1) The micro level considers the relative wage (income) r between two groups. One r, termed r*, is a conflict equilibrium that also gives the minimum number of conflicts. The deviation of r from r* is the labor-market tension. (2) These concepts are shown to generalize to the macro level, leading to a macro conflict relation and a conflict-augmented Phillips curve. (3) Institutions are introduced into the theory, and it is shown how a central trade union reduces the number of conflicts by internalizing parts of the wage structure. Copyright 1989 by The editors of the Scandinavian Journal of Economics.