Product market reforms, labour market institutions and unemployment
We analyze the impact of product market competition on unemployment and wages, and how this depends on labour market institutions. We use differential changes in regulations across OECD countries over the 1980s and 1990s to identify the effects of competition. We find that increased product market competition reduces unemployment, and that it does so more in countries with labour market institutions that increase worker bargaining power. The theoretical intuition is that both firms with market power and unions with bargaining power are constrained in their behaviour by the elasticity of demand in the product market. We also find that the effect of increased competition on real wages is beneficial to workers, but less so when they have high bargaining power. Intuitively, real wages increase through a drop in the general price level, but workers with bargaining power lose out somewhat from a reduction in the rents that they had previously captured.
|Date of creation:||Mar 2006|
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References listed on IDEAS
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- Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
- Giuseppe Nicoletti & Stefano Scarpetta, 2005. "Product Market Reforms and Employment in OECD Countries," OECD Economics Department Working Papers 472, OECD Publishing.
- repec:tpr:qjecon:v:117:y:2002:i:4:p:1369-1413 is not listed on IDEAS
- Bertrand, Marianne & Kramarz, Francis, 2001.
"Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry,"
CEPR Discussion Papers
3039, C.E.P.R. Discussion Papers.
- Bertrand, Marianne & Kramarz, Francis, 2002. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," IZA Discussion Papers 415, Institute for the Study of Labor (IZA).
- Marianne Bertrand & Francis Kramarz, 2001. "Does Entry Regulation Hinder Job Creation? Evidence from the French Retail Industry," NBER Working Papers 8211, National Bureau of Economic Research, Inc.
- Marianne Bertrand & Francis Kramarz, 2001. "Does Entry Regulation Hinder Job Creation ? Evidence from the French Retail Industry," Working Papers 2001-12, Centre de Recherche en Economie et Statistique.
- Belot, M.V.K. & van Ours, J.C., 2001.
"Unemployment and Labor Market Institutions : An Empirical Analysis,"
2001-50, Tilburg University, Center for Economic Research.
- Belot, Michele & van Ours, Jan C., 2001. "Unemployment and Labor Market Institutions: An Empirical Analysis," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 403-418, December.
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