A dynamic contracting model with endogenous prices, wages and investment is presented. It accounts for capital and labour underutilization at steady state and displays various patterns of unemployment rate and capacity utilization rate co-movements as a function of demand and supply shocks. The...

We build a multi-sector model with wage bargaining and imperfect competition to analyse the links between wage interdependence and competitiveness. Quantity constraints together with union power, firm market power and wage externalities play a significant role in the determination of...