Endogenous distortions in product and labor markets
The authors use the common agency approach to analyze the joint determination of product and labor market distortions in a small (developing) open economy. Capital owners and union members lobby the government on tariffs and minimum wages, while factors of production in agriculture (the informal sector) are not organized. The government cares about social welfare, but also values the contributions (monetary or else) made by organized groups. The authors show that product and labor market distortions move in the same direction in response to changes in the relevant economic and political parameters, and that the level of those distortions is not modified by social pacts between capital and labor. They also show that conditionality by foreign agencies should target product market distortions, not labor market distortions. Labor market distortions ought not to be targeted because they are second best: they are the optimal response to the product market distortions. Labor market distortions are likely to adjust in the desired direction once product market distortions are removed or diminished.
|Date of creation:||31 Jan 1995|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/Email:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Grossman, G.M. & Helpman, E., 1992.
"Protection for Sale,"
21-92, Tel Aviv.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
- Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-42, July.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1413. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.