Wage Interdependence Through Decentralized Bargaining - A Survey

The idea that sector-specific unions has mainly been used to support the empirical observation that wages are highly correlated among industries. The sources of wage interdependence can mainly be found in unions‚ preferences, in the nature of technology and in price and demand determination. The presence of externalities and of strategic complementarity among unions leads to sub-optimal equilibria, which generates non-desired inflation, unemployment and possibly also trade balance deficit. The enforces the idea that part of current unemployment can be eliminated by improving the coordination between social actors.