Analysis of Combined Labor Market Shifts in Figure 2.24
The analysis presented in Figure 2.24 shows that a simultaneous increase in firms' market power and a decrease in workers' bargaining power can result in higher inequality without a corresponding rise in unemployment. In the example depicted, the new equilibrium at point C actually has a lower unemployment rate than the initial situation at point A.
0
1
Tags
Economics
Economy
Introduction to Macroeconomics Course
Ch.2 Unemployment, wages, and inequality: Supply-side policies and institutions - The Economy 2.0 Macroeconomics @ CORE Econ
The Economy 2.0 Macroeconomics @ CORE Econ
CORE Econ
Social Science
Empirical Science
Science
Related
Figure 2.24: Initial Equilibrium Setup
Application of the WS-PS Model to the Gig Economy and Inequality
Consider an economy where two changes occur simultaneously over several years: 1) a general decrease in market competition allows firms to set prices further above their production costs, and 2) a widespread decline in the negotiating strength of workers reduces their ability to secure higher pay. What is the most likely combined outcome for the economy's equilibrium real wage and unemployment rate?
Analyzing Labor Market Trends
Reconciling Labor Market Shifts
Evaluating Competing Forces in the Labor Market
Analysis of Combined Labor Market Shifts in Figure 2.24
Learn After
Analyzing Labor Market Trends
Imagine an economy experiences two simultaneous changes: a significant decline in the collective bargaining power of its workforce and a substantial increase in the market power of its largest firms. What is the most plausible combined effect on the economy's real wage level and unemployment rate?
Evaluating Claims on Labor Market Outcomes
An increase in firms' market power will always result in a higher equilibrium unemployment rate, even if workers' bargaining power decreases at the same time.
Explaining Counterintuitive Labor Market Outcomes