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Structural unemployment and the regulation of product market

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  • Alexandre Janiak

Abstract

I assess the impact of product market regulation on unemployment in a large-firm model of the labor market with search frictions and firm entry and exit. Two regulatory frictions are considered: administrative costs of establishing a new firm and the share of capital entrepreneurs recover when exiting. Product market regulation explains half the unemployment gap between Continental Europe and the United States in the calibrated model. More precisely, exit regulation is responsible for the entire explained gap, entry regulation playing no role. The degree of returns to scale and the presence of fixed capital in the model are important assumptions behind those results.

Suggested Citation

  • Alexandre Janiak, 2010. "Structural unemployment and the regulation of product market," Documentos de Trabajo 274, Centro de Economía Aplicada, Universidad de Chile.
    • Handle: RePEc:edj:ceauch:274
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