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Product Market Regulation and Market Work: A Benchmark Analysis

Listed author(s):
  • Lei Fang
  • Richard Rogerson

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.

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File URL: http://www.nber.org/papers/w12891.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12891.

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Date of creation: Feb 2007
Publication status: published as Fang, Lei and Richard Rogerson. "Product Market Regulation and Market Work: A Benchmark Analysis." American Economic Journal: Macroeconomics 3, 2 (April 2011): 163-88.
Handle: RePEc:nbr:nberwo:12891
Note: EFG LS
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