EconPapers    
Economics at your fingertips  
 

Labour and product market competition in a small open economy – Simulation results using a DGE model of the Finnish economy

Juha Kilponen () and Antti Ripatti ()

No 5/2006, Research Discussion Papers from Bank of Finland

Abstract: Using the DGE model of the Finnish Economy (the 'Aino' model), we study the response of the economy to reforms in both labour and product markets.The reforms are two-fold.We assume that the wage mark-up, ie the monopoly power of wage-setters is gradually reduced by 5 percentage points.At the same time, the degree of competition is increased, ie price margins are exogenously reduced by 2 percentage points.These reforms imply a very favourable outcome of the economy.Both consumption and employment increases permanently and the reforms are welfare enhancing.Public balances improve giving room for 1.5 percentage point cut in income taxes.Our simulation exercises clearly demonstrate that such reforms may help in financing the future fiscal burden of an ageing population. Key words: competition, dynamic general equilibrium, public finance JEL classification numbers: E60, C68

Date: 2006-02-05
References: Add references at CitEc
Citations: View citations in EconPapers (31) Track citations by RSS feed

Downloads: (external link)
https://helda.helsinki.fi/bof/bitstream/123456789/13533/1/123346.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bof:bofrdp:2006_005

Access Statistics for this paper

More papers in Research Discussion Papers from Bank of Finland Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland. Contact information at EDIRC.
Bibliographic data for series maintained by Minna Nyman ().

 
Page updated 2022-09-24
Handle: RePEc:bof:bofrdp:2006_005