Central Wage Setting Under Multiple Technological Equilibria : A Mechanism for Equilibrium Elimination

Instituting an initial round of centralized wage setting before an ultimate round of decentralized wage bargaining may actually raise employment. A general multi-equilibrium model is set up with strategic complementarities in the implementation of a new technology through aggregate demand spillovers. In this model, centralized wage setting to establish an outside option wage, which is selectively binding on lo-tech firms, may achieve the "big push" to a hi-tech general equilibrium with higher employment, output, wages and profits