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Product Market Regulation and Market Work: A Benchmark Analysis

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  • Lei Fang
  • Richard Rogerson

Abstract

Recent empirical work finds a negative correlation between product market regulation and aggregate employment. We examine the effect of product market regulations on hours worked in a benchmark aggregate model of time allocation. We find that product market regulations affect time devoted to market work in effectively the same fashion as do taxes on labor income or consumption. In particular, if product market regulations are to affect aggregate market work in this model the key driving force is the size of income transfers associated with the regulation relative to labor income, and the key propagation mechanism is the labor supply elasticity. We show in a two sector model that industry level analysis is of little help in assessing the aggregate effects of product market regulation.

Suggested Citation

  • Lei Fang & Richard Rogerson, 2007. "Product Market Regulation and Market Work: A Benchmark Analysis," NBER Working Papers 12891, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:12891
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    References listed on IDEAS

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    1. Tito Boeri & Giuseppe Nicoletti & Stefano Scarpetta, "undated". "Regulation and Labour Market Performance," Working Papers 158, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
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    Citations

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    Cited by:

    1. Janiak, Alexandre, 2013. "Structural unemployment and the costs of firm entry and exit," Labour Economics, Elsevier, vol. 23(C), pages 1-19.
    2. Richard Rogerson, 2008. "Structural Transformation and the Deterioration of European Labor Market Outcomes," Journal of Political Economy, University of Chicago Press, vol. 116(2), pages 235-259, April.
    3. Mathä, Thomas Y. & Pierrard, Olivier, 2011. "Search in the product market and the real business cycle," Journal of Economic Dynamics and Control, Elsevier, vol. 35(8), pages 1172-1191, August.
    4. Bassanini, Andrea, 2015. "A Bitter Medicine? Short-term Employment Impact of Deregulation in Network Industries," IZA Discussion Papers 9187, Institute for the Study of Labor (IZA).
    5. Zanetti, Francesco, 2009. "Effects of product and labor market regulation on macroeconomic outcomes," Journal of Macroeconomics, Elsevier, vol. 31(2), pages 320-332, June.
    6. Lei Fang & Richard Rogerson, 2009. "Policy Analysis In A Matching Model With Intensive And Extensive Margins," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(4), pages 1153-1168, November.
    7. Romain Bouis & Romain A Duval & Johannes Eugster, 2016. "Product Market Deregulation and Growth; New Country-Industry-Level Evidence," IMF Working Papers 16/114, International Monetary Fund.
    8. repec:eee:jmacro:v:53:y:2017:i:c:p:92-106 is not listed on IDEAS
    9. Kudoh, Noritaka & Sasaki, Masaru, 2011. "Employment and hours of work," European Economic Review, Elsevier, vol. 55(2), pages 176-192, February.
    10. Richard Rogerson, 2006. "Understanding Differences in Hours Worked," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 365-409, July.
    11. Matteo Cacciatore & Giuseppe Fiori, 2016. "The Macroeconomic Effects of Goods and Labor Marlet Deregulation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 1-24, April.
    12. Bokan, Nikola & Hughes Hallett, Andrew, 2008. "The Impact of Tax and Market Distortions on the Phillips Curve and the Natural Rate of Unemployment," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy (IfW), vol. 2, pages 1-28.
    13. George Economides & Apostolis Philippopoulos & Petros Varthalitis, 2015. "Incentives to Work and Performance in the Public Sector," CESifo Working Paper Series 5193, CESifo Group Munich.
    14. Gómez, Manuel A., 2016. "Are taxes a good predictor of time use patterns? Examining the role of some key elasticities," Economic Modelling, Elsevier, vol. 55(C), pages 394-400.
    15. Anurag Banerjee & Parantap Basu & Elisa Keller, 2016. "Business Cost and Skill Acquisition," CEGAP Working Papers 2016_01, Durham University Business School.
    16. George Economides & Apostolis Philippopoulos & Stelios Sakkas, 2016. "Tuition Fees, as User Prices, and Private Incentives," CESifo Working Paper Series 5991, CESifo Group Munich.
    17. Gerwin Bell & Norikazu Tawara, 2009. "The Size of Government and U.S.-European Differences in Economic Performance," IMF Working Papers 09/92, International Monetary Fund.
    18. Wallenius, Johanna, 2013. "Social security and cross-country differences in hours: A general equilibrium analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2466-2482.

    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • L5 - Industrial Organization - - Regulation and Industrial Policy

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