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Is Competition or Collusion in the Product Market Relevant for Labour Markets?

Listed author(s):
  • Fabian Bergès-Sennou
  • Stéphane Caprice

Abstract In non-union models, there is an ambiguous relationship between collusion on the product market and the resulting impact on the labour market. We can derive some conclusions by assuming a dual labour market with qualified and unqualified workers and taking into account the efficiency effect when employing qualified workers. The framework adopted here consists of two firms competing to hire workers on the qualified labour market, and then competing (or colluding) on the product market to sell their production. While qualified workers are heterogeneous in their specialization, firms sell imperfect substitute goods on the product market. First, if the two firms collude in setting prices on the product market, this leads to an increase in the symmetric equilibrium wage in the qualified labour market, as well as a rise in productivity. Unions are not considered. Second, although the number of unqualified workers hired decreases along with the total employment, the wage bill can rise because of intensified competition on the qualified labour market. JEL Classification: J21, J31, L13, Q13.

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Article provided by De Boeck Université in its journal Recherches économiques de Louvain.

Volume (Year): 74 (2008)
Issue (Month): 3 ()
Pages: 273-298

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Handle: RePEc:cai:reldbu:rel_743_0273
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