The macroeconomics of social pacts

Abstract

In this paper we analyze macroeconomic interactions between trade unions, the central bank and the …scal policymaker. We explicitly model unions'concern for public expenditure, paving the way for an analysis of the potential gains from cooperation between the …scal policymaker and the unions, i.e. the so-called corporatist or social pacts that have characterized economic policies in a number of European countries in the last few decades. We also highlight the profoundly di¤erent incentives generated by institutional arrangements such as the Maastricht criteria and the Stability and Growth Pact. The former has unambiguously induced more e¢ cient outcomes; the latter is likely to back…re! Jel: E42, E58, E61, E62, E64, H30, J51, J58.

Inequality Undermines Democracy and Growth

“…The idea that rich and poor households have different propensities to consume and save as Kaldor (1961) argued, with potentially important consequences for short-term macroeconomic analysis as well as for medium-to-long-term growth, did not leave a lasting imprint on mainstream macroeconomics. Also, the notion that consumers and workers care about relative incomes and wages as argued by Duesenberry (1949) and later also by Gylfason and Lindbeck (1984a, b), Acocella et al (2009), Card et al (2012), and others makes only occasional appearances in macroeconomic models. The steady progress in the standard of life since 1960 is evidenced by rising per capita incomes and also by the rise in average global life expectancy by 19 years since 1960, or from 53 years in 1960 to 72 years in 2016.…”

Inequality Undermines Democracy and Growth

“…The idea that rich and poor households have different propensities to consume and save as Kaldor (1961) argued, with potentially important consequences for short-term macroeconomic analysis as well as for medium-to-long-term growth, did not leave a lasting imprint on mainstream macroeconomics. Also, the notion that consumers and workers care about relative incomes and wages as argued by Duesenberry (1949) and later also by Gylfason and Lindbeck (1984a, b), Acocella et al (2009), Card et al (2012) (Milanovic 2016). From the 1980s to 2015, the top 1% of households increased its share of pre-tax national income from 8% to 12% in Europe and from 8% to 20% in United States.…”

The Cost of Social Pacts

“… In the 1960s and 1970s first‐generation social pacts tended to exchange wage moderation for increases in public expenditures, whereas the second‐generation social pacts of the 1990s apparently exchanged wage moderation for public expenditure cuts (Summers et al ., ; Visser, ; Acocella et al ., ).…”