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Underemployment and capital irreversivility in a unionized overlaping generations economy

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1993-12
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Abstract
In a unionized OLG model, it is shown that steady-state underutilization of labour and equipment can be due to the combination of the two following elements: (i) Irreversibility of capital, technology and skill decisions, (ii) Firm specific shocks on productivity. The presence of unions is neither sufficient nor necessary for having unemployment. The result of Devereux and Lockwood (1991) that union power affect positively the capital stock in general equilibrium does not always hold under capital irreversibility.
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Unemployment, Underutilization, Irreversibility, Investment, Union power
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