Product Market Reforms, Labour Market Institutions and Unemployment

Rachel Griffith, Rupert Harrison and Gareth Macartney

Economic Journal, 2007, vol. 117, issue 519, C142-C166

Abstract: We analyse the impact of product market competition on unemployment, and how this depends on labour market institutions. Theoretically, both firms with market power and unions with bargaining power are constrained in their behaviour by the elasticity of demand in the product market. We use differential changes in regulations across OECD countries over the 1980s and 1990s to identify the effects of competition. We find that increased competition reduces unemployment, more so in countries with labour market institutions that increase worker bargaining power. We also find that competition increases real wages but less so when bargaining power is high. Copyright 2007 The Author(s). Journal compilation Royal Economic Society 2007.

Date: 2007
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Working Paper: Product Market Reforms, Labour Market Institutions and Unemployment (2006)
Working Paper: Product market reforms, labour market institutions and unemployment (2006)
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