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Is Imperfect Competition in the Product Market Relevant for Labour Markets?

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  • Christoph Weiss

Abstract

Recent research in macroeconomics emphasises the importance of imperfect competition in the product market for labour market outcomes. We investigate one aspect of this issue by specifying a dynamic labour demand model where firms face different degrees of competition in the product market and test its predictions for 299 US manufacturing industries. We find that the long‐run equilibrium level of industry employment as well as the speed of labour demand adjustment decreases with market power. Our results imply that imperfect competition in the product market explains part of the observed labour market rigidities and also sheds new light on two “stylized facts” in industrial organisation, the observation of procyclical movements in productivity and price–cost margins in concentrated industries.

Suggested Citation

  • Christoph Weiss, 1998. "Is Imperfect Competition in the Product Market Relevant for Labour Markets?," LABOUR, CEIS, vol. 12(3), pages 451-471, September.
    • Handle: RePEc:bla:labour:v:12:y:1998:i:3:p:451-471
    DOI: 10.1111/1467-9914.00075
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    Cited by:

    1. Alberto Bucci & Fabio Fiorillo & Stefano Staffolani, 2003. "Can Market Power Influence Employment, Wage Inequality and Growth?," Metroeconomica, Wiley Blackwell, vol. 54(2‐3), pages 129-160, May.
    2. Amable, Bruno & Gatti, Donatella, 2000. "Is perfection optimal? Employment and product market competition," Discussion Papers, Research Unit: Economic Change and Employment FS I 00-304, WZB Berlin Social Science Center.
    3. Jo Seldeslachts, 2002. "Interactions Between Product and Labour Market Reforms," UFAE and IAE Working Papers 519.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).

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