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Cumulative effects of labor market distortions in a developing country

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  • Norback, Pehr-Johan

Abstract

This paper considers a small open economy with an input-output industrial structure that creates vertical linkages and multiple equilibria. An imperfect labor market is introduced by assuming unionized labor. It is shown that a deregulation of the labor market may trigger a large discontinuous expansion of industrial output, as reduced wage-costs start a circular, cumulative process in which expansions of the up-and downstream industries promote each other. Centralization of collective bargaining may, however, also be conductive to industrialization.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 65 (2001)
Issue (Month): 1 (June)
Pages: 135-152

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Handle: RePEc:eee:deveco:v:65:y:2001:i:1:p:135-152

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  1. Pencavel, John, 1995. "The role of labor unions in fostering economic development," Policy Research Working Paper Series 1469, The World Bank.
  2. Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-45, November.
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  19. Pemberton, James, 1988. "A 'Managerial' Model of the Trade Union," Economic Journal, Royal Economic Society, vol. 98(392), pages 755-71, September.
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Cited by:
  1. Marjit, Sugata & Kar, Saibal & Acharyya, Rajat, 2007. "Agricultural prospects and informal wage in general equilibrium," Economic Modelling, Elsevier, vol. 24(3), pages 380-385, May.
  2. Agenor, Pierre-Richard & Nabli, Mustapha K. & Yousef, Tarik & Jensen, Henning Tarp, 2004. "Labor market reforms, growth, and unemployment in labor-exporting countries in the Middle East and North Africa," Policy Research Working Paper Series 3328, The World Bank.

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