Strikes and the real wage-employment nexus: A hicksian analysis of industrial disputes and pay

This paper advances and analyzes a simple model of industrial conflict and pay dynamics. In addition to its account of these endogenous variables, the model exhibits a potential to account for stagflationary episodes of the type experienced by large parts of the world economy in the 1970s. The analysis also contributes to a central but still unsettled question in business cycle theory (and empirics): namely, whether real-wage movements respond systematically to fluctuations in employment and output. With some success the model is applied to the West German economy. Institut für Sozialwissenschaften, University of Basel. I should like to thank Peter Bernholz for comments on an earlier draft of this paper. Financial support from the Deutsche Forschungsgemeinschaft is gratefully acknowledged. More recent contributions to this discussion are Scarth and Myatt (1980) and McDonald and Solow (1981).