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Can Market Power Influence Employment, Wage Inequality and Growth?

  • Alberto Bucci
  • Fabio Fiorillo
  • Stefano Staffolani

We introduce an efficiency wage mechanism into an innovation-driven growth model. Due to asymmetric information problems the labour market is segmented and homogeneous workers may be employed either in the non-competitive intermediate sector or in the competitive research sector. We analyse the impact that the monopoly position enjoyed by intermediate firms in the product market may have on employment, wage inequality and growth, and the sectoral distribution of workers. We find that the lower the product market competition in the capital goods sector, the higher the research employment, the lower the intermediate sector employment and the higher the growth rate. The relationships between growth and inequality, on the one hand, and between growth and employment, on the other, are both negative. Copyright Blackwell Publishing Ltd 2003.

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Article provided by Wiley Blackwell in its journal Metroeconomica.

Volume (Year): 54 (2003)
Issue (Month): 2-3 (05)
Pages: 129-160

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Handle: RePEc:bla:metroe:v:54:y:2003:i:2-3:p:129-160
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