The relationship between product market competition and unemployment with profit sharing

Erkki Koskela and Rune Stenbacka

Labour Economics, 2012, vol. 19, issue 3, 291-297

Abstract: We investigate the implications of product market imperfections on negotiated wages and equilibrium unemployment under profit sharing. We show that intensified product market competition reduces equilibrium unemployment in a strictly monotonic way when the trade union's bargaining power exceeds the profit share. If the profit share exceeds the trade union's bargaining power, the effect of product market competition is ambiguous: there is a threshold for the benefit–replacement ratio above (below) which intensified product market competition increases (decreases) equilibrium unemployment. The profit share and the union's bargaining power affect the wage mark-up, and thereby equilibrium unemployment, in different directions.

Keywords: Product market competition; Profit sharing; Wage bargaining; Equilibrium unemployment (search for similar items in EconPapers)
JEL-codes: J33 J51 L11 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:labeco:v:19:y:2012:i:3:p:291-297

DOI: 10.1016/j.labeco.2012.02.003

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