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Cumulative Effects of Labor Market Distortions in a Developing Country

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Author Info
Norback, P.-J.

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Abstract

This paper considers a small open economy where an input-output industrial structure, scale economies and imperfect competition, create vertical linkages and multiple equilibria. In this environment, an imperfect labor market is introduced by assuming unionized labor. It is shown that if the vertical linkages are sufficiently strong, 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 the expansions of the up- and downstream industries promote each other.

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Publisher Info
Paper provided by Research Institute of Industrial Economics (IFN) in its series Research Institute of Industrial Economics Working Papers with number 520.

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Length: 23 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:fth:iniesr:520

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Related research
Keywords: ECONOMIC DEVELOPMENT ; WORKERS' REPRESENTATION ; TRADE;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

References listed on IDEAS
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  2. Markusen, James R. & Venables, Anthony J., 1999. "Foreign direct investment as a catalyst for industrial development," European Economic Review, Elsevier, vol. 43(2), pages 335-356, February. [Downloadable!] (restricted)
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  3. Agell, Jonas & Lommerud, Kjell Erik, 1993. " Egalitarianism and Growth," Scandinavian Journal of Economics, Blackwell Publishing, vol. 95(4), pages 559-79, December.
    Other versions:
  4. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June. [Downloadable!] (restricted)
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  6. Rodrik, Dani, 1996. "Coordination failures and government policy: A model with applications to East Asia and Eastern Europe," Journal of International Economics, Elsevier, vol. 40(1-2), pages 1-22, February. [Downloadable!] (restricted)
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  20. Driffill, John & van der Ploeg, Frederick, 1995. " Trade Liberalization with Imperfect Competition in Goods and Labour Markets," Scandinavian Journal of Economics, Blackwell Publishing, vol. 97(2), pages 223-43, June.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. 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. [Downloadable!]
    Other versions:
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