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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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number
520.
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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Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
References listed on IDEAS 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.:
Moene, Karl Ove & Wallerstein, Michael, 1997.
"Pay Inequality,"
Journal of Labor Economics,
University of Chicago Press, vol. 15(3), pages 403-30, July.
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