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Cumulative Effects of Labor Market Distortions in a Developing Country

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  • Norbäck, Pehr-Johan

    ()
    (The Research Institute of Industrial Economics)

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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File URL: http://swopec.hhs.se/iuiwop/papers/iuiwop0520.pdf
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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 520.

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Length: 23 pages
Date of creation: 19 Jan 1999
Date of revision: 05 Oct 2000
Publication status: Forthcoming in Journal of Developing Economics.
Handle: RePEc:hhs:iuiwop:0520

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Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
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Web page: http://www.ifn.se/
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Keywords: Vertical linkages; Multiple equilibria; Labor unions;

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References

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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, 2007. "Labor market reforms, growth, and unemployment in labor-exporting countries in the Middle East and North Africa," Journal of Policy Modeling, Elsevier, vol. 29(2), pages 277-309.

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