The Distributive and Welfare Effects of Product and Labour Market Deregulation

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The Distributive and Welfare Effects of Product and Labour Market Deregulation

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Gabriele CARDULLO (UNIVERSITY OF GENOA, DIEM)

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Gabriele Cardullo

Abstract

This paper studies the effects of product and labour market deregulation on wage inequality and welfare. By constructing an analytically tractable model in which the level of product market competition and the wages are endogenously distributed, I show that even though deregulation in labour markets raises the aggregate level of employment and the average real wage, the welfare of trade unions may decrease in sectors with a low level of competition. Moreover, removing barriers to entry in the goods market has mixed effects on inequality : the wage variance and the Gini index are lower, but the ratio of the highest over the lowest wage paid in the economy increases. Finally, an interesting result of the model concerns the wage density function. By parameterizing the rates of firms creation and destruction on the basis of Belgian data, the resulting shape of the wage distribution exhibits an empirically accurate form, unimodal and positively skewed.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2009007.

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Length: 37
Date of creation: 01 Apr 2009
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Handle: RePEc:ctl:louvir:2009007

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure

This paper has been announced in the following NEP Reports:

NEP-ALL-2009-07-03 (All new papers)
NEP-LAB-2009-07-03 (Labour Economics)
NEP-MAC-2009-07-03 (Macroeconomics)

References listed on IDEAS
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Maria Guadalupe, 2007. "Product Market Competition, Returns to Skill, and Wage Inequality," Journal of Labor Economics, University of Chicago Press, vol. 25, pages 439-474. [Downloadable!]
Other versions:
- María Guadalupe, 2005. "Product Market Competition Returns to Skill and Wage Inequality," CEP Discussion Papers dp0686, Centre for Economic Performance, LSE. [Downloadable!]
- Maria Guadalupe, 2005. "Product Market Competition, Returns to Skill and Wage Inequality," IZA Discussion Papers 1556, Institute for the Study of Labor (IZA). [Downloadable!]
- Guadalupe, Maria, 2004. "Product Market Competition, Returns to Skill and Wage Inequality," CEPR Discussion Papers 4434, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Other versions:
- Monique Ebell & Christian Haefke, 2002. "Product Market Deregulation and the U.S. Employment Miracle," Economics Working Papers 930, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2006. [Downloadable!]
- Monique Ebell & Christian Haefke, 2006. "Product Market Deregulation and the U.S. Employment Miracle," IZA Discussion Papers 1946, Institute for the Study of Labor (IZA). [Downloadable!]
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Other versions:
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