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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. van de Klundert, Theo & Smulders, Sjak, 1997. " Growth, Competition and Welfare," Scandinavian Journal of Economics, Wiley Blackwell, vol. 99(1), pages 99-118, March.
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  12. Aghion, Philippe & Harris, Christopher & Vickers, John, 1997. "Competition and growth with step-by-step innovation: An example," European Economic Review, Elsevier, vol. 41(3-5), pages 771-782, April.
  13. Bean, Charles & Pissarides, Christopher, 1993. "Unemployment, consumption and growth," European Economic Review, Elsevier, vol. 37(4), pages 837-854, May.
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  21. 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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  26. Aghion, Philippe & Howitt, Peter, 1996. " Research and Development in the Growth Process," Journal of Economic Growth, Springer, vol. 1(1), pages 49-73, March.
  27. Fabio FIORILLO & Stefano STAFFOLANI, 2000. "To redistribute or not? Unemployment benefit, workfare and citizen's income in a dual labour market," Working Papers 128, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
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  29. Eli Berman & John Bound & Zvi Griliches, 1993. "Changes in the Demand for Skilled Labor within U.S. Manufacturing Industries: Evidence from the Annual Survey of Manufacturing," NBER Working Papers 4255, National Bureau of Economic Research, Inc.
  30. Dale T. Mortensen & Christopher A. Pissarides, 1998. "Technological Progress, Job Creation and Job Destruction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 733-753, October.
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