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Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets

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  • Olivier Blanchard
  • Francesco Giavazzi

Abstract

Product and labor market deregulation reduce and redistribute rents, leading economic players to adjust to this new distribution. It typically comes with distribution and dynamic effects. To study these effects, we build a macroeconomic model on two central assumptions: monopolistic competition in the goods market, which determines the size of rents; and bargaining in the labor market, which determines the distribution of rents. Product market regulation determines entry costs and the degree of competition. Labor market regulation determines the bargaining power of workers. We show the effects of deregulation. We then use our results to discuss the political economy of deregulation, and recent macroeconomic evolutions in Europe. © 2001 the President and Fellows of Harvard College and the Massachusetts Institute of Technology

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Bibliographic Info

Article provided by MIT Press in its journal The Quarterly Journal of Economics.

Volume (Year): 118 (2003)
Issue (Month): 3 (August)
Pages: 879-907

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Handle: RePEc:tpr:qjecon:v:118:y:2003:i:3:p:879-907

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  1. Layard, R. & Nickell, S., 1988. "Is Unemployment Lower If Unions Bargain Over Employment?," Papers 308, London School of Economics - Centre for Labour Economics.
  2. Ricardo J. Caballero & Mohamad L. Hammour, 1996. "The Macroeconomics of Specificity," NBER Working Papers 5757, National Bureau of Economic Research, Inc.
  3. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  4. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  5. Spector, David, 2002. "Competiton and the capital-labor conflict," CEPREMAP Working Papers (Couverture Orange) 0207, CEPREMAP.
  6. Tito Boeri & Giuseppe Nicoletti & Stefano Scarpetta, . "Regulation and Labour Market Performance," Working Papers 158, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  7. Argia Sbordone, 2002. "An optimizing model of U.S. wage and price dynamics," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  8. Rotemberg, Julio J. & Woodford, Michael, 1999. "The cyclical behavior of prices and costs," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 16, pages 1051-1135 Elsevier.
  9. Oliver J. Blanchard, 1997. "The Medium Run," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 28(2), pages 89-158.
  10. Paz Espinosa, Maria & Rhee, Changyong, 1989. "Efficient Wage Bargaining as a Repeated Game," The Quarterly Journal of Economics, MIT Press, vol. 104(3), pages 565-88, August.
  11. Bentollia, S. & Saint-Paul, G., 1999. "Explaining Movements in the Labor Share," Papers 9905, Centro de Estudios Monetarios Y Financieros-.
  12. Ricardo J. Caballero & Mohamad L. Hammour, 1997. "Jobless Growth: Appropriability, Factor Substitution, and Unemployment," NBER Working Papers 6221, National Bureau of Economic Research, Inc.
  13. Paul Joskow & Nancy L. Rose, 1987. "The Effects of Economic Regulation," Working papers 447, Massachusetts Institute of Technology (MIT), Department of Economics.
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  1. Las raíces políticas de la crisis del Euro
    by Cives in Politikon on 2012-05-22 11:48:47
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