Endogenous Distortions in Product and Labour Markets

Martin Rama and Guido Tabellini

No 1143, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper uses the common agency approach to analyse the joint determination of product and labour market distortions in a small (developing) open economy. Capital owners and union members lobby the government on both tariffs and minimum wages, while other factors of production are not organized. The paper shows that product and labour market distortions move in the same direction in response to changes in economic and political parameters, and that their level is not modified by social pacts between capital and labour. It also shows that conditionality by foreign agencies should target product market distortions, not labour market distortions.

Keywords: Lobbying; Minimum Wage; Social Pact (search for similar items in EconPapers)
JEL-codes: F10 J00 (search for similar items in EconPapers)
Date: 1995-02
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Citations: View citations in EconPapers (1)

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Working Paper: Endogenous distortions in product and labor markets (1995)
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