Is Competition or Collusion in the Product Market Relevant for Labour Markets?
In non-union models, there is an ambiguous relationship between collusion on the product market and the resulting impact on the labour market. We can derive some conclusions by assuming a dual labour market with qualified and unqualified workers taking into account the efficiency effect when employing qualified workers. The framework adopted here consists of two firms competing to hire workers on the qualified labour market, and then competing (or colluding) on the product market to sell their production. While qualified workers are heterogeneous in their specialization, firm sell imperfect substitute goods on the product market. First if the two firms collude in the setting prices on the product market, this leads to an increase in the symmetric equilibrium wage in the qualified labour market, as well as a rise in productivity. Unions are not considered. Second, altough the number of unqualified workers hired decreases along with the total employment, the wage bill can rise because of intensified competition on the qualified labour market.
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