We thank the Journal Editor Gabriel Talmain, Jelle Visser and three anonymous referees for their useful comments on previous drafts. The usual disclaimer applies.
THE COST OF SOCIAL PACTS
Article first published online: 16 NOV 2011
© 2011 The Authors. Bulletin of Economic Research © 2011 John Wiley & Sons Ltd and the Board of Trustees of the Bulletin of Economic Research
Bulletin of Economic Research
Volume 65, Issue 3, pages 238–255, July 2013
How to Cite
Acocella, N. and Di Bartolomeo, G. (2013), THE COST OF SOCIAL PACTS. Bulletin of Economic Research, 65: 238–255. doi: 10.1111/j.1467-8586.2011.00405.x
- Issue published online: 3 JUL 2013
- Article first published online: 16 NOV 2011
- side payments;
- social pacts;
The paper deals with the various institutions capable of improving the macroeconomic performance in a situation of conflict between unions and the government. In particular, we discuss the difficulty of agreeing with a cooperative solution and the need for some kind of explicit or implicit compensation for unions in signing a social pact. A cooperative solution encapsulating the operation of the different mechanisms designed to cope with the conflict and including the various elements of compensation is presented. The model shows that the amount of the explicit compensation depends on the extent of the strategic conflict between the parties as well as on the factors that determine the implicit compensation (i.e., unions’ inflation aversion, partisanship) or are partial substitutes for it (i.e., the conservative central banker). Finally, the role played by external anticipated and unanticipated shocks is also discussed.