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Product market deregulation and labor market outcomes

  • Monique Ebell
  • Christian Haefke

We consider the dynamic relationship between product market entry regulation and equilibrium unemployment. The main theoretical contribution is combining a Mortensen-Pissarides model with monopolistic competition in the goods market and individual wage bargaining. Product market competition affects unemployment via two channels: the output expansion effect and a countervailing effect due to a hiring externality. Competition is then linked to barriers to entry. A calibrated model compares a high-regulation European regime to a low-regulation Anglo-American one. Our quantitative analysis suggests that under individual bargaining, no more than half a percentage point of European unemployment rates can be attributed to entry regulation.

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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 726.

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Date of creation: Dec 2002
Date of revision: Dec 2003
Handle: RePEc:upf:upfgen:726
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