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Can Market Power influence Employment, Wage Inequality and Growth ?

  • Bucci, Alberto

    (Università di Bologna, Sede di Rimini, Facoltà di Economia; UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

  • Fiorillo, Fabio

    (Aniversità di Ancona, Dipartimento di Economia)

  • Staffolani, Stefano

    (Aniversità di Ancona, Dipartimento di Economia)

We introduce an efficiency-wage mechanism into an innovation-driven growth model. Due to informational problems, the labour market is segmented and homogeneous workers may be employed either in a non-competitive intermediate sector or in a competitive research one. We analyse the impact that variations in the monopoly power of the intermediate firms may have on unemployment, wage inequality and growth. We find that the lower the product market competition in the intermediate sector, the higher the research employment, the lower the intermediate sector employment, the higher the aggregate growth rate. Growth and inequality are negatively correlated whereas growth and unemployment are positively correlated. The last two results are obtained through numerical simulations.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2000030.

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Length: 26
Date of creation: 01 Jan 2001
Date of revision:
Handle: RePEc:ctl:louvir:2000030
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  1. Aghion, Philippe & Howitt, Peter, 1992. "A Model of Growth through Creative Destruction," Econometrica, Econometric Society, vol. 60(2), pages 323-51, March.
  2. Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000. "Regulation And Labour Market Performance," CEPR Discussion Papers 2420, C.E.P.R. Discussion Papers.
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  11. Bucci, Alberto, 1998. "Market Power and Growth in a Schumpeterian Framework of Innovation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1998024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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  13. Blundell, Richard & Griffith, Rachel & Van Reenen, John, 1995. "Dynamic Count Data Models of Technological Innovation," Economic Journal, Royal Economic Society, vol. 105(429), pages 333-44, March.
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  22. Eriksson, Clas, 1997. "Is There a Trade-Off between Employment and Growth?," Oxford Economic Papers, Oxford University Press, vol. 49(1), pages 77-88, January.
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  27. Aghion, Philippe & Howitt, Peter, 1996. " Research and Development in the Growth Process," Journal of Economic Growth, Springer, vol. 1(1), pages 49-73, March.
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  29. Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, March.
  30. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
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