Equilibrium Unemployment and Credit Market Imperfections: The Critical Role of Labour Mobility
We investigate the interaction between labour and credit market imperfections for the determination of equilibrium unemployment within the framework of the "right-tomanage" approach. Our analysis highlights the critical role of labour mobility for the evaluation of the employment implications of intensified credit market competition. Without labour mobility increased bargaining power of banks will have adverse employment effects. However, with a labour force mobile across industries this relationship is frequently reversed if firms adopt profit sharing schemes. If employment at a fixed wage complements unemployment benefits to constitute the trade union's relevant outside option, intensified credit market competition will increase equilibrium unemployment. This relationship is shown to hold also for cases where the outside option incorporates profit sharing schemes as long as the labour market imperfections – measured by the relative bargaining power of the trade unions - are sufficiently strong.
|Date of creation:||2002|
|Date of revision:|
|Contact details of provider:|| Postal: Poschingerstrasse 5, 81679 Munich|
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo-group.de
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dasgupta, Sudipto & Sengupta, Kunal, 1993. "Sunk Investment, Bargaining and Choice of Capital Structure," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(1), pages 203-20, February.
- Nickell, Stephen & Layard, Richard, 1999.
"Labor market institutions and economic performance,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084
- Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
- Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
- Daron Acemoglu, 2000.
"Credit Market Imperfections and Persistent Unemployment,"
NBER Working Papers
7938, National Bureau of Economic Research, Inc.
- Acemoglu, Daron, 2001. "Credit market imperfections and persistent unemployment," European Economic Review, Elsevier, vol. 45(4-6), pages 665-679, May.
- Stephen G. Bronars & Donald R. Deere, 1991. "The Threat of Unionization, the Use of Debt, and the Preservation of Shareholder Wealth," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 231-254.
- Funke, Michael & Maurer, Wolf & Strulik, Holger, 1999.
" Capital Structure and Labour Demand: Investigations Using German Micro Data,"
Oxford Bulletin of Economics and Statistics,
Department of Economics, University of Oxford, vol. 61(2), pages 199-215, May.
- Michael Funke & Wolf Maurer & Holger Strulik, 1998. "Capital Structure and Labour Demand: Investigations Using German Micro Data," Quantitative Macroeconomics Working Papers 19801, Hamburg University, Department of Economics.
- Dalmazzo, Alberto, 1996. " Debt and Wage Negotiations: A Bankruptcy-Based Approach," Scandinavian Journal of Economics, Wiley Blackwell, vol. 98(3), pages 351-64.
- Cahuc, P. & Dormont, B., 1992.
"Profit-Sharing: Does It Increase Productivity and Employment? A Theoretical Model and Empirical Evidence of French Micro Data,"
Papiers d'Economie MathÃ©matique et Applications
92.45, UniversitÃ© PanthÃ©on-Sorbonne (Paris 1).
- Cahuc, Pierre & Dormont, Brigitte, 1997. "Profit-sharing: Does it increase productivity and employment? A theoretical model and empirical evidence on French micro data," Labour Economics, Elsevier, vol. 4(3), pages 293-319, September.
- Oliver Hart, 2000.
"Different Approaches to Bankruptcy,"
NBER Working Papers
7921, National Bureau of Economic Research, Inc.
- Oliver Hart, 2000. "Different Approaches to Bankruptcy," Harvard Institute of Economic Research Working Papers 1903, Harvard - Institute of Economic Research.
- Weitzman, Martin L, 1985.
"The Simple Macroeconomics of Profit Sharing,"
American Economic Review,
American Economic Association, vol. 75(5), pages 937-53, December.
- Perotti, E.C. & Spier, K.E., 1991.
"Capital Structure As A Bargaining Tool: The Role Of Leverage In Contract Renegociation,"
Harvard Institute of Economic Research Working Papers
1548, Harvard - Institute of Economic Research.
- Perotti, Enrico C & Spier, Kathryn E, 1993. "Capital Structure as a Bargaining Tool: The Role of Leverage in Contract Renegotiation," American Economic Review, American Economic Association, vol. 83(5), pages 1131-41, December.
- Holmlund, B., 1988.
"Profit Sharing, Wage Bargaining, And Unemployment,"
1988l, Uppsala - Working Paper Series.
- Koskela, Erkki & Stenbacka, Rune, 2000. "Is there a tradeoff between bank competition and financial fragility?," Journal of Banking & Finance, Elsevier, vol. 24(12), pages 1853-1873, December.
- Nickell, Stephen & Nicolitsas, Daphne, 1999.
"How does financial pressure affect firms?,"
European Economic Review,
Elsevier, vol. 43(8), pages 1435-1456, August.
- Nickell, S. & Nicolitsas, D., 1995. "How Does Financial Pressure Affect Firms," Economics Series Working Papers 99170, University of Oxford, Department of Economics.
- Stephen Nickell & Daphne Nicolitsas, 1995. "How does financial pressure affect firms?," LSE Research Online Documents on Economics 20698, London School of Economics and Political Science, LSE Library.
- Stephen Nickell & D Nicolitsas, 1995. "How Does Financial Pressure Affect Firms?," CEP Discussion Papers dp0266, Centre for Economic Performance, LSE.
- Bester, H., 1994.
"A bargaining model of financial intermediation,"
1994-15, Tilburg University, Center for Economic Research.
- Etienne Wasmer & Philippe Weil, 2004.
"The Macroeconomics of Labor and Credit Market Imperfections,"
American Economic Review,
American Economic Association, vol. 94(4), pages 944-963, September.
- Wasmer, Etienne & Weil, Philippe, 2000. "The Macroeconomics of Labor and Credit Market Imperfections," IZA Discussion Papers 179, Institute for the Study of Labor (IZA).
- Wasmer, Etienne & Weil, Philippe, 2002. "The Macroeconomics of Labour and Credit Market Imperfections," CEPR Discussion Papers 3334, C.E.P.R. Discussion Papers.
- repec:hhs:bofrdp:2000_012 is not listed on IDEAS
- R. G. Lipsey & Kelvin Lancaster, 1956. "The General Theory of Second Best," Review of Economic Studies, Oxford University Press, vol. 24(1), pages 11-32.
- Weitzman, Martin L, 1987. "Steady State Unemployment under Profit Sharing," Economic Journal, Royal Economic Society, vol. 97(385), pages 86-105, March.
- Simon P. Anderson & Michael Devereux, 1989. "Profit-Sharing and Optimal Labour Contracts," Canadian Journal of Economics, Canadian Economics Association, vol. 22(2), pages 425-33, May.
- Jerger, Jurgen & Michaelis, Jochen, 1999. " Profit Sharing, Capital Formation and the NAIRU," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(2), pages 257-75, June.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780198284345.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_654. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Klaus Wohlrabe)
If references are entirely missing, you can add them using this form.