Government Fiscal Efforts vs. Labour Union Strikes: It Takes Two to Tango

Massimiliano Castellani (), Luca Fanelli () and Marco Savioli
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Massimiliano Castellani: Department of Economics, University of Bologna, Italy; The Rimini Centre for Economic Analysis, Italy

Working Paper series from Rimini Centre for Economic Analysis

Abstract: In this paper, we propose a novel policy-game model to analyse the simultaneous interaction between the government and the labour union in a unionised economy. Our model explains how the economic and political interaction between labour unions, concerning wages and strikes, and the government, dealing with unemployment and fiscal policy, gives rise to a long run Cournot-Nash equilibrium. We estimate the policy-game model by a cointegrated Vector Autoregressive system using Italian quarterly data (1960-2009) on government budget surplus (fiscal efforts) and on hours not worked (strikes) and the speed of their long run adjustment. At equilibrium, a rise in unemployment has a negative effect on the level of effort and strike, while a rise in wages has a positive and negative effect on the level of effort and strike, respectively. A phase diagram interpretation of the estimated model is provided and some policy implications are discussed.

Keywords: Fiscal efforts; strikes; policy game; VEqC; speed of adjustment (search for similar items in EconPapers)
JEL-codes: C32 C54 C72 E62 J51 (search for similar items in EconPapers)
Date: 2013-06, Revised 2014-01
New Economics Papers: this item is included in nep-gth, nep-lab and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:rim:rimwps:33_13

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