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Politics and the Labor Market: The Role of Frictions

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  • Luigi Bonaventura
  • Andrea Consoli
  • Matteo Richiardi
  • Salvo Spagano

Abstract

We study how political intermediation in the labor market interacts with search frictions. Politicians create and control (to a certain extent) business opportunities for firms, hence the creation of new vacancies. But to compete for these vacancies workers have to give their support to politicians. This leads to a fragmentation of the labor market, where politicians act as mediators between demand and supply. We show that in presence of information asymmetries (when non-aliated workers are not able to distinguish non-aliated firms, for which they are eligible, from aliated ones, for which they are not eligible) the impact of political intermediation is U-shaped, and can more than double the resulting unemployment rate.

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Bibliographic Info

Paper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 53.

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Length: 33 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:cca:wplabo:53

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  1. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  2. Acemoglu, D. & Verdier, T., 1997. "The Choice between Market Failures and Corruption," DELTA Working Papers 97-06, DELTA (Ecole normale supérieure).
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  9. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  10. repec:rie:review:y:2000:v:2:i:3 is not listed on IDEAS
  11. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
  12. Richard A. Posner, 1974. "Theories of Economic Regulation," NBER Working Papers 0041, National Bureau of Economic Research, Inc.
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  14. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  15. Laura Pagani, 2003. "Why Do People from Southern Italy Seek Jobs in the Public Sector?," LABOUR, CEIS, vol. 17(1), pages 63-91, 03.
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