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On Artificial Structural Unemployment

Author

Listed:
  • Maciej K. Dudek

    (SzkoÅ‚a GÅ)

  • ówna Handlowa

    (Narodowy Bank Polski)

Abstract

Above market clearing wages are shown to prevail as an outcome of a game in which employers possess and employees lack the ability to coordinate. It is established in a monopolistically competitive framework that it may be optimal for individual firms to coordinate and restrict entry of indirect competitors and thus increase profits by paying above market clearing wages as the higher wage bill need not outweigh the increase in profits due to entry restriction. Resulting unemployment is shown to be socially costly. The paper notes that a tax on revenue of the incumbent firms can be welfare improving

Suggested Citation

  • Maciej K. Dudek & ówna Handlowa, 2006. "On Artificial Structural Unemployment," Computing in Economics and Finance 2006 171, Society for Computational Economics.
    • Handle: RePEc:sce:scecfa:171
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    References listed on IDEAS

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    More about this item

    Keywords

    Unemployment; Coordination;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General

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