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.:
- 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.
- Nickell, Stephen, 1999. "Product markets and labour markets1," Labour Economics, Elsevier, vol. 6(1), pages 1-20, March.
- Layard, R. & Nickell, S., 1991.
"Unemployment in the OECD Countries,"
Economics Series Working Papers
99130, University of Oxford, Department of Economics.
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Ching-to Albert Ma & Andrew M. Weiss, 1990.
"A Signaling Theory of Unemployment,"
NBER Working Papers
3565, National Bureau of Economic Research, Inc.
- 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.
- Gersbach, Hans, 2000. "Promoting Product Market Competition to Reduce Unemployment in Europe: An Alternative Approach?," Kyklos, Wiley Blackwell, vol. 53(2), pages 117-33.
- Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
- Nickell, S., 1991. "Wages, Unemployment and Population Change," Economics Series Working Papers 99122, University of Oxford, Department of Economics.
- 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.
- 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.
- Tito Boeri & Giuseppe Nicoletti & Stefano Scarpetta, .
"Regulation and Labour Market Performance,"
158, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Hans Gersbach, 1999. "Product market competition, unemployment and income disparities," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(2), pages 221-240, June.
- Bertola, Giuseppe & Ichino, Andrea, 1995. "Wage Inequality and Unemployment: US vs Europe," CEPR Discussion Papers 1186, C.E.P.R. Discussion Papers.
- 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.
- 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.
- 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.
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.