| The fact that inflation hurts the possibility of reelection of the incumbent government is the starting point of this dissertation. This problem is focused from two perspectives. One, economic interest groups can try to push the rate of inflation up, if they do not want the incumbent government to be reelected. Two, the government can try to repress inflation until after elections, to improve its chances of reelection. Both of these perspectives arose from observing the experience of the Peronist trade unions and the Radical government during the 1983-1989 period in Argentina.; In the first chapter, I develop a political trade union model taking into consideration that the real wage depends both on the market and on the redistribution of income carried out through the political system. It is a two-period game between the government, that sets the exchange rate, and a trade union confederation, that sets wages. The main result is that, in a very polarized political system, trade unions can cooperate with stabilization plans of labor governments, showing wage restraint, and they can harass instead the plans of non-labor governments, pushing inflation up with excessive wage demands.; The second chapter analyzes the history of relations between governments and trade unions in the postwar period in Argentina. Though Peronist governments are usually associated to populist policies that have led to inflationary outbursts, there are instances where they have been able to count on trade union cooperation to stabilize prices. Other constitutional governments have not been able to count on voluntary wage restraint, while military governments have resorted to authoritarian measures to moderate wage claims.; The last chapter, coauthored with Ernesto H. Stein, analyzes the political motivations governments have to defer devaluations until after elections. This is modelled as a signalling game where voters choose the candidate they believe is most competent, and the signal to evaluate the incumbent is the rate of inflation. This can be one way to account for the stop-go cycles of inflation observed in many high inflation economies. |
