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Competition, Work Rules and Productivity

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  • Benjamin Bridgman

    (Bureau of Economic Analysis)

Abstract

More competitive markets are associated with higher productivity. However, changes in competition complicate productivity measurement since changing mark-ups may shift factor shares. This paper examines productivity measurement in markets with market power and restrictive work rules: rules that induce wages to be paid for non-productive labor hours. It develops a theoretical model to explain why workers would want restrictive work rules and how competition leads to their reduction. I model a monopoly firm whose workers dictate wages and work rules. Work rules allow workers to maintain both high levels of employment and wages. Competition reduce work rules and increase productivity by lowering mark-ups. The theoretical findings are consistent with the empirical literature on the impact of increasing competitive pressure on productivity.

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File URL: http://www.economicdynamics.org/meetpapers/2011/paper_289.pdf
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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 289.

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Date of creation: 2011
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Handle: RePEc:red:sed011:289

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  1. Jose E. Galdon-Sanchez & James A. Schmitz, Jr., 2003. "Competitive pressure and labor productivity: world iron ore markets in the 1980s," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Spr, pages 9-23.
  2. Helder Vasconcelos, 2005. "Tacit Collusion, Cost Asymmetries, and Mergers," RAND Journal of Economics, The RAND Corporation, vol. 36(1), pages 39-62, Spring.
  3. Timothy Dunne & Shawn Klimek & James Schmitz, Jr., 2010. "Competition and Productivity: Evidence from the Post WWII U.S. Cement Industry," Working Papers 10-29, Center for Economic Studies, U.S. Census Bureau.
  4. Berthold Herrendorf & Arilton Teixeira, . "Barriers to Entry and Development," Working Papers 2167726, Department of Economics, W. P. Carey School of Business, Arizona State University.
  5. Bridgman, Benjamin R. & Livshits, Igor D. & MacGee, James C., 2007. "Vested interests and technology adoption," Journal of Monetary Economics, Elsevier, vol. 54(3), pages 649-666, April.
  6. Severin Borenstein & Joseph Farrell, 2007. "Do investors forecast fat firms? Evidence from the gold-mining industry," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 626-647, 09.
  7. Peter W. Wright & Paulo Bastos, 2012. "Exchange Rates and Wages in Unionized Labor Markets," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 65(4), pages 975-999, October.
  8. Bridgman, Benjamin & Gomes, Victor & Teixeira, Arilton, 2011. "Threatening to Increase Productivity: Evidence from Brazil's Oil Industry," World Development, Elsevier, vol. 39(8), pages 1372-1385, August.
  9. Matthew F. Mitchell & Andrea Moro, 2006. "Persistent Distortionary Policies with Asymmetric Information," American Economic Review, American Economic Association, vol. 96(1), pages 387-393, March.
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Cited by:
  1. Klaus Desmet & Stephen Parente, 2014. "Resistance to Technology Adoption: The Rise and Decline of Guilds," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(3), pages 437-458, July.
  2. Lee Ohanian & David Lagakos & Simeon Alder, 2012. "The Decline of the U.S. Rust Belt: A Macroeconomic Analysis," 2012 Meeting Papers 793, Society for Economic Dynamics.

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