The name is absent

where, <≡ = .„,'<.... > 1 K₁ = (⅜¹) ~" σ-^∙α- _κ, = (2ÿl) - σ⅛≈<■>

Price is a markup over marginal cost, which depends on the wage rate
and the output level (when σ < 1): output and employment depend on the
real wage and total output in the economy.

2.2 The Structure of Contracts in a GTE

In this section we outline an economy in which there are potentially many
sectors with different types of wage-setting processes. Within each sector
there is a more or less standard Taylor process (i.e. overlapping contracts
of a specified length). The economy is called a Generalized Taylor Economy
(GTE).Corresponding to the continuum of firms f there is a unit interval of
household-unions (one per firm). The economy consists N sectors i = 1...N.
The budget shares of the N sectors with uniform prices (when prices pf are
equal for all f ∈ [0,1]) are given by a_i with ^ⁿ=₁ ɑ-; = 1, the N vector (o⅛)ⁿ=₁
being denoted a ,where a ∈ A^n-1.

We can partition the unit interval into sub-intervals representing each
sector. Let us define the cumulative budget share of sectors к = 1...i.

i
ɑi = J2 "^fe
k=1

with d₀ = 0 and d_n = 1. The interval for sector i is then [d_i~₁, d_i].

Within each sector, each firm is matched with a firm-specific union: there
are N_i cohorts of unions and firms in sector i. Again, we can partition the
interval [d_i~₁, d_i] into cohort intervals: let the share of each cohort within the
sector be λ_ij so that ^N= ₁ ʌv = 1, with the N_i-vector λ_i ∈ Δⁿ* ¹ Again,
we can define the cumulative share Λ_ij∙ analogously to d_k. The interval of
firm-unions corresponding to cohort j in sector i is then
ʌ                         ʌ

(*i-1 + ∖j-1 ^ai^{, a}i-1 + ʌijQ⅛

Clearly, if symmetry is assumed (cohorts are of equal size) A_ij- = N_i ¹ and
ʌij = j'Nf¹.

The sectors are differentiated by the integer² contract length T_i ∈ Z₊₊,
which is the same for all cohorts within a sector. The timing of the wage

²We work in discrete time in this paper, although the model obviously generalises to
continuous time.

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