Is perfection optimal? Employment and product market competition
This paper proposes a model of efficiency wage with endogenous workers flows in interaction with imperfect competition on the product markets. Subject to economy-wide shocks, firms hire and fire workers thus generating a certain turnover. We show that the intensity of this turnover negatively affects workers incentives and induces higher efficiency wage premia. Increased competition pushes real wages up but effort incentive requirements prevent large wage adjustments. Hence, adjustments are made with quantities: both the separation and hiring rates increase with competition, increasing the wage premium and contributing to lower employment. As a consequence, an employmentmaximising level of competition may exist.
|Date of creation:||2000|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: ++49 - 30 - 25491 - 0
Fax: ++49 - 30 - 25491 - 684
Web page: http://www.wzb.eu/
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.:
- Jackman, Richard & Layard, Richard, 1991. "Does Long-term Unemployment Reduce a Person's Chance of a Job? A Time-Series Test," Economica, London School of Economics and Political Science, vol. 58(229), pages 93-106, February.
- Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
- Nickell, S., 1991. "Wages, Unemployment and Population Change," Economics Series Working Papers 99122, University of Oxford, Department of Economics.
- Bertola, Giuseppe & Rogerson, Richard, 1997.
"Institutions and labor reallocation,"
European Economic Review,
Elsevier, vol. 41(6), pages 1147-1171, June.
- Bertola, Giuseppe & Rogerson, Richard, 1996. "Institutions and Labour Reallocation," CEPR Discussion Papers 1519, C.E.P.R. Discussion Papers.
- bertola, G. & Rogerson, R., 1996. "Institutions and Labor Reallocation," Papers 272, Banca Italia - Servizio di Studi.
- Giuseppe Bertola & Richard Rogerson, 1996. "Institutions and Labor Reallocation," NBER Working Papers 5828, National Bureau of Economic Research, Inc.
- Hans Gersbach, 1999. "Product market competition, unemployment and income disparities," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(2), pages 221-240, June.
- Albert Ma, Ching-to & Weiss, Andrew M., 1993.
"A signaling theory of unemployment,"
European Economic Review,
Elsevier, vol. 37(1), pages 135-157, January.
- Richard Layard & Stephen Nickell, 1992.
"Unemployment in the OECD Countries,"
CEP Discussion Papers
dp0081, Centre for Economic Performance, LSE.
- Bertola, Giuseppe & Ichino, Andrea, 1995. "Wage Inequality and Unemployment: US vs Europe," CEPR Discussion Papers 1186, C.E.P.R. Discussion Papers.
- Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000.
"Regulation And Labour Market Performance,"
CEPR Discussion Papers
2420, C.E.P.R. Discussion Papers.
- Gersbach, Hans, 2000. "Promoting Product Market Competition to Reduce Unemployment in Europe: An Alternative Approach?," Kyklos, Wiley Blackwell, vol. 53(2), pages 117-33.
- Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
- Lebow, David E, 1992. "Imperfect Competition and Business Cycles: An Empirical Investigation," Economic Inquiry, Western Economic Association International, vol. 30(1), pages 177-93, January.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
- Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
When requesting a correction, please mention this item's handle: RePEc:zbw:wzbece:fsi00304. 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: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.