This paper studies corporatism as the outcome of bargaining between the government and a representative labor union. We show that if negotiations between these two parties only relate to macroeconomic stabilization, corporatism can never be beneficial to both parties. As corporatist policies are...

The chapter presents a model, where the union is interested in the level of wages, employment and the level of public expenditure. Social pacts are shown not only to lead to a superior macroeconomic performance, but to be also acceptable by unions. The key to their acceptability lies in the...

This paper investigates the effects of cooperation (corporatism) on macroeconomic performance by considering a rather standard policy game between the government and a monopoly union. We stress the shortcomings of the traditional way used to model cooperation in policy games (the maximization of...

By using the recent Gertler and Kiyotaki.s (2010) setup, this paper explores the interaction between real distortions stemming from the labor market institutions and financial shocks. We find that neither labor market imperfections nor fiscal institutions determining tax wedges have an impact on...

We challenge the widely held belief that New Keynesian models cannot predict optimal positive inflation rates. In fact, interest rates are justified by the Phelps argument that monetary financing can alleviate the burden of distortionary taxation. We obtain this result because, in contrast with...

We address the coordination failures that arise in models with multiple equilibria and study how they may be resolved by reconsidering the role of cheap talk communication as an equilibrium selection device. We introduce an outside option (representing common-knowledge expected outcomes in the...

The paper shows that a monetary policy regime that allows for a positive inflation rate disciplines monopolistic wages setters if these, when setting contracts, internalize the consequences of their choices for economic outcomes over the life of the contract. We also show that discretionary...

We challenge the widely held belief that New-Keynesian models cannot predict optimal positive inflation rates. In fact these are justi…fied by the Phelps argument that monetary fi…nancing can alleviate the burden of distortionary taxation. We obtain this result because, in contrast with...