A standard specification of the WS-PS model based on wage bargaining between employees and employers allows to understand at the macroeconomic level the main feature of the long run dynamics of the unemployment rate and of the wage rate in France. In this theoretical framework, three auxiliary hypotheses are made to estimate the equilibrium unemployment rate and the corresponding negotiated wage rate, this latter being expressed by a weighted average of the wages desired by employees (equation WS) and those offered by employers (equation PS) : i) the time-varying degree of rigidity of the labor market is represented by a stochastic state variable estimated by the Kalman filter method ; ii) the reservation wage is anchored by excess or default on the legal minimum wage (SMIC) ; iii) “other factors” than wages and prices, which are not specified a priori by the theory while they can also influence wages and prices setting, are summarized by the output gap. According to these assumptions, our results show that the observed unemployment gradually adjusts to the equilibrium unemployment, which is made of three components : a chronic component due to the underlying factors in the repartition in the added-value (real reservation wage, social contributions, productivity, margin of companies), a conjunctural component depending on the output gap, and a frictional component due to the imperfect mobility of labor and to technical progress. The negotiated wage rate, on which the observed wage adjusts itself, appears to depend on the reservation wage, the social contributions, the price level, the labor productivity, the profit margin of companies, the unionization rate and on the unemployment rate whose influence is time-varying. Our results suggest that in the average the bargaining power of employers dominates that of employees.

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Following the oil shock of 1973, a massive wave of inflation spread throughout Europe. Combined with low growth and rising unemployment, it had major implications on the social front with conflicts linked to indexed wage-pricing, for economic theory with the controversies surrounding the Phillips curve and monetarism, and for public polic y with the priority afforded to the fight against inflation at the expense of full employment.

This volume explores these upheavals through a broad historical lens, by examining countries in Western, Northern and Eastern Europe, as well as trade unions, businesses and international organizations, particularly the European Community and GATT.

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