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Product market deregulation and labor market outcomes

Monique Ebell and Christian Haefke ()

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: We consider the dynamic relationship between product market entry regulation and equilibrium unemployment. The main theoretical contribution is combining a Mortensen-Pissarides model with monopolistic competition in the goods market and individual wage bargaining. Product market competition affects unemployment via two channels: the output expansion effect and a countervailing effect due to a hiring externality. Competition is then linked to barriers to entry. A calibrated model compares a high-regulation European regime to a low-regulation Anglo-American one. Our quantitative analysis suggests that under individual bargaining, no more than half a percentage point of European unemployment rates can be attributed to entry regulation.

Keywords: Product market competition; barriers to entry; wage bargaining; European Unemployment Puzzle (search for similar items in EconPapers)
JEL-codes: E24 J63 L16 O00 (search for similar items in EconPapers)
Date: 2002-12, Revised 2003-12
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Working Paper: Product Market Deregulation and Labor Market Outcomes (2003) Downloads
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