On Artificial Structural Unemployment

Maciej Dudek and ówna Handlowa
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ówna Handlowa: Narodowy Bank Polski

No 171, Computing in Economics and Finance 2006 from Society for Computational Economics

Abstract: Above market clearing wages are shown to prevail as an outcome of a game in which employers possess and employees lack the ability to coordinate. It is established in a monopolistically competitive framework that it may be optimal for individual firms to coordinate and restrict entry of indirect competitors and thus increase profits by paying above market clearing wages as the higher wage bill need not outweigh the increase in profits due to entry restriction. Resulting unemployment is shown to be socially costly. The paper notes that a tax on revenue of the incumbent firms can be welfare improving

Keywords: Unemployment; Coordination (search for similar items in EconPapers)
JEL-codes: D50 E24 (search for similar items in EconPapers)
Date: 2006-07-04
New Economics Papers: this item is included in nep-lab and nep-mac
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