Is corporatism feasible?

In this paper we consider a standard policy game between the Government and a union. In such a framework, we first investigate the effects of corporatism on macroeconomic performance vis -à-vis different kinds of non-cooperative equilibria. Afterwards, we introduce in the literature the issue of the feasibility of corporatism, i.e., whether and under what conditions it is in the interest of both agents to implement a corporatist approach to economic policies. We find that it is difficult to implement corporatism, although it generally increases social welfare, since it often reduces the union’s utility. In particular, we show that a micro-founded union will never find it profitable to co-operate with the Government, unless side-payments are considered. The study of this last issue is however beyond the scope of this paper. JEL: E24, E61, E31, E58 and J51.