Advanced Search
MyIDEAS: Login to save this paper or follow this series

Endogenous distortions in product and labor markets


Author Info

  • Rama, Martin
  • Tabellini, Guido


The authors use the common agency approach to analyze the joint determination of product and labor market distortions in a small (developing) open economy. Capital owners and union members lobby the government on tariffs and minimum wages, while factors of production in agriculture (the informal sector) are not organized. The government cares about social welfare, but also values the contributions (monetary or else) made by organized groups. The authors show that product and labor market distortions move in the same direction in response to changes in the relevant economic and political parameters, and that the level of those distortions is not modified by social pacts between capital and labor. They also show that conditionality by foreign agencies should target product market distortions, not labor market distortions. Labor market distortions ought not to be targeted because they are second best: they are the optimal response to the product market distortions. Labor market distortions are likely to adjust in the desired direction once product market distortions are removed or diminished.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL:
Download Restriction: no

Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 1413.

as in new window
Date of creation: 31 Jan 1995
Date of revision:
Handle: RePEc:wbk:wbrwps:1413

Contact details of provider:
Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page:
More information through EDIRC

Related research

Keywords: Labor Policies; Environmental Economics&Policies; Economic Theory&Research; Banks&Banking Reform; Transport and Trade Logistics; Environmental Economics&Policies; Economic Theory&Research; Banks&Banking Reform; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Health Economics&Finance;

Other versions of this item:

Find related papers by JEL classification:


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.:
as in new window
  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers, Tel Aviv 21-92, Tel Aviv.
  2. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, Econometric Society, vol. 54(4), pages 923-42, July.
Full references (including those not matched with items on IDEAS)


Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Azam, Jean-Paul & Salmon, Claire, 2003. "Strikes and Political Activism of Trade Unions: Theory and Application to Bangladesh," IDEI Working Papers, Institut d'Économie Industrielle (IDEI), Toulouse 166, Institut d'Économie Industrielle (IDEI), Toulouse.
  2. Douglas Marcouiller, 1995. "Putting in politics: A review of economic models with endogenous determination of policy," Forum for Social Economics, Springer, Springer, vol. 25(1), pages 37-51, September.
  3. Philippe Aghion & Robin Burgess & Stephen Redding & Fabrizio Zilibotti, 2006. "The unequal effects of liberalization: evidence from dismantling the License Raj in India," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 3773, London School of Economics and Political Science, LSE Library.
  4. Gil S. Epstein & Shmuel Nitzan, 2003. "Political culture and monopoly price determination," Social Choice and Welfare, Springer, Springer, vol. 21(1), pages 1-19, 08.
  5. Rama, Martin & Tabellim, Guido, 1998. "Lobbying by capital and labor over trade and labor market policies," European Economic Review, Elsevier, Elsevier, vol. 42(7), pages 1295-1316, July.


This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.


Access and download statistics


When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1413. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.