A Model of Market and Political Power Interactions for Southern Europe

Tryphon Kollintzas (), Vanghelis Vassilatos and Dimitris Papageorgiou

No 10359, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In recent years the growth pattern of most Southern European countries has been disturbed, as those countries are suffering from economic crises that go beyond the usual business cycle. In this paper, we develop a dynamic general equilibrium model of market and political power interactions that explains this growth reversal. Moreover, the model is consistent with several stylized facts of those countries, where wages in the public sector relative to the private sector are high and these wage differentials correlate negatively with public sector employment over total employment, total factor productivity, and output growth. The model is a synthesis of the insiders-outsiders labor market structure and the concept of an elite government. Outsiders form a group of workers that supply labor to a competitive private sector. And, insiders form a group of workers that enjoy market power in supplying labor to the public sector and influence the policy decisions of government, including those that affect the development and maintenance of public sector infrastructures.

Keywords: Growth; Insiders - outsiders; Politicoeconomic equilibrium; Public sector wage premium; Southern european economies (search for similar items in EconPapers)
JEL-codes: J45 O43 O52 P16 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-dge and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://cepr.org/publications/DP10359 (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:cpr:ceprdp:10359

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP10359

Access Statistics for this paper

More papers in CEPR Discussion Papers from Centre for Economic Policy Research 33 Great Sutton Street, London EC1V 0DX, UK.
Bibliographic data for series maintained by CEPR ().