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Unemployment and Product Market Competition in a Cournot Model with Efficiency Wage

This paper analyzes the impact of product market competition on unemployment, wage and welfare in a model where unemployment is caused by efficiency wage considerations and oligopolistic firms compete in quantity. It is shown that while more intensive competition in product market increases output and reduces price, it does not necessarily lead to a lower unemployment rate or a higher wage for workers. Consequently, the relationship between the intensity of competition and the level of employment (respectively, wage, welfare) is not monotonic, and, in some instances, has an inverted-U shape.

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File URL: http://www.carleton.ca/economics/wp-content/uploads/cep10-04.pdf
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Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number 10-04.

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Length: 30 pages
Date of creation: 17 May 2010
Date of revision:
Publication status: Published: Carleton Economic Papers
Handle: RePEc:car:carecp:10-04
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  1. Spector, David, 2004. "Competition and the capital-labor conflict," European Economic Review, Elsevier, vol. 48(1), pages 25-38, February.
  2. Olivier Blanchard & Francesco Giavazzi, . "Macroeconomic effects of regulation and deregulation in goods and labor markets," Working Papers 187, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  3. Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
  4. Bruno Amable & Donatella Gatti, 2005. "Is Perfection Optimal? Employment and Product Market Competition," Macroeconomics 0507008, EconWPA.
  5. Gersbach, Hans, 2000. "Promoting Product Market Competition to Reduce Unemployment in Europe: An Alternative Approach?," Kyklos, Wiley Blackwell, vol. 53(2), pages 117-33.
  6. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1989. "Unemployment in an Extended Cournot Oligopoly Model," Oxford Economic Papers, Oxford University Press, vol. 41(3), pages 490-505, July.
  7. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, 01.
  8. Tito Boeri & Giuseppe Nicoletti & Stefano Scarpetta, . "Regulation and Labour Market Performance," Working Papers 158, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  9. N. Gregory Mankiw & Michael D. Whinston, 1986. "Free Entry and Social Inefficiency," RAND Journal of Economics, The RAND Corporation, vol. 17(1), pages 48-58, Spring.
  10. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  11. Paul Geroski & Paul Gregg & John van Reenen, 1995. "Market Imperfections and Employment," OECD Jobs Study Working Papers 5, OECD Publishing.
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