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Labor and product market reforms: questioning policy complementarity

Author

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  • Bruno Amable
  • Donatella Gatti

Abstract

This article proposes a dynamic efficiency wages model with imperfect competition on labor and product markets. In this framework, job insecurity generates a perverse effect on workers incentives, which shifts up the real wages schedule and may yield employment losses. Product market regulation and redundancy payments contribute to reducing labor turnover, thus easing the workers incentive constraint. Consequently, and against conventional wisdom, regulations may have a positive impact on employment, and a substitution effect may emerge across deregulation policies. Moreover, in some cases, a complementarity arises between regulations in product and labor markets, both interacting to ensure more stable labor relations. Copyright 2006, Oxford University Press.

Suggested Citation

  • Bruno Amable & Donatella Gatti, 2006. "Labor and product market reforms: questioning policy complementarity," Industrial and Corporate Change, Oxford University Press, vol. 15(1), pages 101-122, February.
  • Handle: RePEc:oup:indcch:v:15:y:2006:i:1:p:101-122
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    References listed on IDEAS

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    1. Salant, Stephen W, 1984. "Preemptive Patenting and the Persistence of Monopoly: Comment," American Economic Review, American Economic Association, pages 247-250.
    2. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, pages 190-209.
    3. Boone, Jan, 2000. "Competition," CEPR Discussion Papers 2636, C.E.P.R. Discussion Papers.
    4. Norbäck, Pehr-Johan & Persson, Lars, 2012. "Entrepreneurial innovations, competition and competition policy," European Economic Review, Elsevier, pages 488-506.
    5. Granstrand, Ove & Sjölander, Sören, 1990. "The Acquisition of Technology and Small Firms by Large Firms," Working Paper Series 213, Research Institute of Industrial Economics.
    6. Nancy T. Gallini & Ralph A. Winter, 1985. "Licensing in the Theory of Innovation," RAND Journal of Economics, The RAND Corporation, pages 237-252.
    7. Pontus Braunerhjelm & Roger Svensson, 2010. "The inventor’s role: was Schumpeter right?," Journal of Evolutionary Economics, Springer, pages 413-444.
    8. Pontus Braunerhjelm & Roger Svensson, 2010. "The inventor’s role: was Schumpeter right?," Journal of Evolutionary Economics, Springer, pages 413-444.
    9. Arora, Ashish & Fosfuri, Andrea & Gambardella, Alfonso, 2001. "Markets for Technology and Their Implications for Corporate Strategy," Industrial and Corporate Change, Oxford University Press, pages 419-451.
    10. Granstrand, Ove & Sjolander, Soren, 1990. "The acquisition of technology and small firms by large firms," Journal of Economic Behavior & Organization, Elsevier, vol. 13(3), pages 367-386, June.
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    Citations

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    Cited by:

    1. Vesna Stavrevska, 2011. "The efficiency wages perspective to wage rigidity in the open economy: a survey," International Journal of Manpower, Emerald Group Publishing, vol. 32(3), pages 273-299, June.
    2. Bernhard Boockmann & Raimund Krumm & Michael Neumann & Pia Rattenhuber, 2013. "Turning the Switch: An Evaluation of the Minimum Wage in the German Electrical Trade Using Repeated Natural Experiments," German Economic Review, Verein für Socialpolitik, vol. 14(3), pages 316-348, August.
    3. Bernhard Boockmann, 2010. "The Combined Employment Effects of Minimum Wages and Labor Market Regulation—a Meta-Analysis," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 61(Supplemen), pages 167-188.
    4. repec:crs:ecosta:es419-420b is not listed on IDEAS
    5. Rault, Christophe & Vaubourg, Anne-Gaël, 2011. "Labour Market Institutions and Unemployment: Does Finance Matter?," IZA Discussion Papers 5606, Institute for the Study of Labor (IZA).
    6. Gilbert Cette & Jimmy Lopez, 2012. "ICT demand behaviour: an international comparison," Economics of Innovation and New Technology, Taylor & Francis Journals, pages 397-410.
    7. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2012. "Unemployment and finance: how do financial and labour market factors interact?," Oxford Economic Papers, Oxford University Press, pages 464-489.
    8. Philippe Aghion & Philippe Askenazy & Renaud Bourlès & Gilbert Cette & Nicolas Dromel, 2008. "Distance à la frontière technologique, rigidités de marché, éducation et croissance," Économie et Statistique, Programme National Persée, vol. 419(1), pages 11-30.
    9. Eduardo Rodriguez-Oreggia & Hector Moreno Moreno & David Mulato Martinez, 2008. "Has product market competition reshaped returns to schooling in Mexico?," EconoQuantum, Revista de Economia y Negocios, Universidad de Guadalajara, Centro Universitario de Ciencias Economico Administrativas, Departamento de Metodos Cuantitativos y Maestria en Economia., vol. 5(1), pages 61-77, Julio - D.
    10. repec:hal:psewpa:halshs-00566792 is not listed on IDEAS
    11. Gilbert Cette & Jimmy Lopez, 2008. "What Explains the ICT Diffusion Gap Between the Major Industrialized Countries: An Empirical Analysis?," International Productivity Monitor, Centre for the Study of Living Standards, vol. 17, pages 28-39, Fall.
    12. Silvia Fedeli & Vito Mariella & Marco Onofri, "undated". "Determinants of joblessness during the economic crisis: the impact of criminality in the Italian labour market," Working Papers 176, University of Rome La Sapienza, Department of Public Economics.

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