Trade unions, nonneutrality and stagflation

The claim that in policy games nonneutrality and a stagflation bias emerge in equilibrium if the unions care about inflation, per se, is discussed. This assumption is shown to be not necessary to obtain a stagflation bias; the same applies to nonneutrality if a government acts in the economy. The question of whether unions should be envisaged as ''institutions'' (i.e., interested in variables unrelated to wages and employment) is also addressed. Two model-based alternatives providing ''microeconomic'' foundations versus ''macroeconomic'' foundations to unions' behaviour are presented. The conclusion is that the modelling of unions remains an unsettled problem.