2024/13 | LEM Working Paper Series | ||||||||||||||||
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The political economy of complex evolving systems: the case of declining unionization and rising inequalities |
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Giovanni Dosi, Marcelo C. Pereira, Andrea Roventini, Maria Enrica Virgillito |
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Keywords | |||||||||||||||||
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Complexity, Capitalism, Socio-economic structure, Macro-evolutionary agent-based models
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JEL Classifications | |||||||||||||||||
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J51, E02, E24, C63
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Abstract | |||||||||||||||||
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This chapter presents an application of the multi-sector labour
augmented K+S agent-based model to two contemporary challenges in
political economy, namely declining unionization and rising
inequality, with reference to mid-term evidence in the US. What has
been the effect of declining unionization? We focus, as an example,
upon the introduction of legislations such as Right- to-Work (RTW)
laws, disfavouring union firms and the way they affected the dynamics
of the labour market. The model proves to be a solid and rich tool in
order to confront different scenarios emerging out of the interaction
of an endogenous dynamic competition between union and non union
firms, the latter arriving at a specific time, mimicking the exogenous
introduction of RTW laws. The arrival of non union firms induces
direct first-order effects, as rising inequality at the workplace and
macro level, but also, indirect, second order effects, as lower rates
of employment absorption and consumption patterns skewed toward
wealthy, luxury consumption goods. In that, complexity economics
proves to be a promising avenue to incorporate and confront the grand
challenges of contemporary capitalism.
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