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Labor Market Institutions and the Second-Best Tariff

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  • Rama, Martin

Abstract

Labor market distortions provide a second-best case for protection. However, the implications are less obvious when the product market is imperfectly competitive too, as suggested by several partial equilibrium studies. This paper adopts a general equilibrium approach, combining unionization in labor markets with monopolistic competition in product markets. Two labor market settings are considered: fully centralized wage bargaining ('Scandinavia', for short) and negotiation at the firm level ('Latin America'). The competitive labor market case is used as a benchmark. It is shown that in Latin America the second-best tariff is higher, and the welfare level lower, than in the benchmark case. Scandinavia reaches the first best under free trade. Copyright 1997 by The editors of the Scandinavian Journal of Economics.

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Bibliographic Info

Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 99 (1997)
Issue (Month): 2 (June)
Pages: 299-314

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Handle: RePEc:bla:scandj:v:99:y:1997:i:2:p:299-314

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Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442

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Cited by:
  1. Alvaro Forteza & Martín Rama, 2000. "Labor Market "Rigidity" and the Success of Economic Reforms Across more than One Hundred Countries," Documentos de Trabajo (working papers) 0600, Department of Economics - dECON.
  2. Ben J. Heijdra & Christian Keuschnigg, 2000. "Integration and Search Unemployment: An Analysis of Eastern EU Enlargement," CESifo Working Paper Series 341, CESifo Group Munich.
  3. Ben J. Heijdra & Christian Keuschnigg & Wilhelm Kohler, 2001. "Eastern enlargement of the EU: Jobs, investment and welfare in present member countries," Economics working papers 2001-11, Department of Economics, Johannes Kepler University Linz, Austria.
  4. Alvaro Forteza & Martin Rama, 2006. "Labor Market 'Rigidity' and the Success of Economic Reforms Across More Than 100 Countries," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 9(1), pages 75-105.

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