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Endogenous Market Structures and Labor Market Dynamics

  • Andrea Colciago

    (Department of Economics, University of Milano Bicocca)

  • Lorenza Rossi


    (Department of Economics and Quantitative Methods, University of Pavia)

We propose a flexible prices model where endogenous market structures and search and matching frictions in the labor market interact endogenously. The interplay between firms endogenous entry, strategic interactions among producers and labor market frictions represents a strong amplification channel of technology shocks on labor market variables, and helps addressing the unemployment-volatility puzzle. Consistently with U.S. evidence, new firms create a large fraction of new jobs and grow faster than more mature firms, net firms’ entry is procyclical and the price mark up is countercyclical.

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Paper provided by University of Pavia, Department of Economics and Quantitative Methods in its series Quaderni di Dipartimento with number 139.

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Length: 42 pages
Date of creation: Feb 2011
Date of revision: Feb 2011
Handle: RePEc:pav:wpaper:139
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