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Can Market Power influence Employment, Wage Inequality and Growth ?

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Author Info
Bucci, Alberto (Universitˆ di Bologna, Sede di Rimini, Facoltˆ di Economia; UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
Fiorillo, Fabio (Aniversitˆ di Ancona, Dipartimento di Economia)
Staffolani, Stefano (Aniversitˆ di Ancona, Dipartimento di Economia)

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Abstract

We introduce an efficiency-wage mechanism into an innovation-driven growth model. Due to informational problems, the labour market is segmented and homogeneous workers may be employed either in a non-competitive intermediate sector or in a competitive research one. We analyse the impact that variations in the monopoly power of the intermediate firms may have on unemployment, wage inequality and growth. We find that the lower the product market competition in the intermediate sector, the higher the research employment, the lower the intermediate sector employment, the higher the aggregate growth rate. Growth and inequality are negatively correlated whereas growth and unemployment are positively correlated. The last two results are obtained through numerical simulations.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2000030.

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Length: 26
Date of creation: 01 Jan 2001
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Handle: RePEc:ctl:louvir:2000030

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Related research
Keywords: Efficiency wages; research and development; endogenous growth; market power;

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
D92 - Microeconomics - - Intertemporal Choice and Growth - - - Intertemporal Firm Choice and Growth, Investment, or Financing
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
O3 - Economic Development, Technological Change, and Growth - - Technological Change

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