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Politics and the Labor Market: The Role of Frictions

  • Luigi Bonaventura
  • Andrea Consoli
  • Matteo Richiardi
  • Salvo Spagano

We study how political intermediation in the labor market interacts with search frictions. Politicians create and control (to a certain extent) business opportunities for firms, hence the creation of new vacancies. But to compete for these vacancies workers have to give their support to politicians. This leads to a fragmentation of the labor market, where politicians act as mediators between demand and supply. We show that in presence of information asymmetries (when non-aliated workers are not able to distinguish non-aliated firms, for which they are eligible, from aliated ones, for which they are not eligible) the impact of political intermediation is U-shaped, and can more than double the resulting unemployment rate.

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Paper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 53.

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Length: 33 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:cca:wplabo:53
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  1. Torsten Persson & Guido Tabellini & Francesco Trebbi, 2001. "Electoral Rules and Corruption," NBER Working Papers 8154, National Bureau of Economic Research, Inc.
  2. Acemoglu, D. & Verdier, T., 1997. "The Choice between Market Failures and Corruption," DELTA Working Papers 97-06, DELTA (Ecole normale supérieure).
  3. Goncalves Veiga, Linda & Chappell, Henry W, Jr, 2002. " Politics and Unemployment in Industrialized Democracies," Public Choice, Springer, vol. 110(3-4), pages 261-82, March.
  4. Richard A. Posner, 1974. "Theories of Economic Regulation," Bell Journal of Economics, The RAND Corporation, vol. 5(2), pages 335-358, Autumn.
  5. Lui, Francis T., 1986. "A dynamic model of corruption deterrence," Journal of Public Economics, Elsevier, vol. 31(2), pages 215-236, November.
  6. Laura Pagani, 2003. "Why Do People from Southern Italy Seek Jobs in the Public Sector?," LABOUR, CEIS, vol. 17(1), pages 63-91, 03.
  7. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
  8. Pranab Bardhan, 1997. "Corruption and Development: A Review of Issues," Journal of Economic Literature, American Economic Association, vol. 35(3), pages 1320-1346, September.
  9. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
  10. Shleifer, Andrei & Vishny, Robert W, 1994. "Politicians and Firms," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 995-1025, November.
  11. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, vol. 98(3), pages 371-400, August.
  12. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  13. Mauro, Paolo, 1995. "Corruption and Growth," The Quarterly Journal of Economics, MIT Press, vol. 110(3), pages 681-712, August.
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