Date Added: Jan 2010
This paper provides a new growth model by considering strategic behaviour in the supply of labour. Workers form a labour union with the aim of manipulating wages in their own benefit. The authors analyse the implications on labour market dynamics at business cycle frequencies of getting away from the price-taking assumption. A calibrated monetary version of the union model does quite a reasonable job in replicating the dynamic features of labour market variables observed in post-war U.S. data.