Cumulative Effects of Labor Market Distortions in a Developing Country

Pehr-Johan Norbäck

No 520, Working Paper Series from Research Institute of Industrial Economics

Abstract: This paper considers a small open economy with an input-output industrial structure that creates vertical linkages and multiple equilibria. An imperfect labor market is introduced by assuming unionized labor. It is shown that a deregulation of the labor market may trigger a large discontinuous expansion of industrial output, as reduced wage-costs start a circular, cumulative process in which expansions of the up-and downstream industries promote each other. Centralization of collective bargaining may, however, also be conductive to industrialization.

Keywords: Vertical linkages; Multiple equilibria; Labor unions (search for similar items in EconPapers)
JEL-codes: F12 J50 O11 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1999-01-19, Revised 2001-01-10
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Forthcoming in Journal of Developing Economics.

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Related works:
Journal Article: Cumulative effects of labor market distortions in a developing country (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:iuiwop:0520

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