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Competition and the capital-labor conflict

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  • Spector, David

Abstract

This paper analyzes the macroeconomic effects of changes in the intensity of product market competition. The focus is on the interaction between imperfect competition in product markets and bargaining in the labor market. The main result is that, while a uniform intensification of product market competition increases employment, it may cause real wages to fall, in the short run as well as in the long run. This is especially likely if labor market regulations are favorable to workers. Therefore, product market and labor market regulations tend to reinforce each other politically, and compensatory fiscal transfers may be needed in order to enact employment-enhancing deregulation policies.
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Suggested Citation

  • Spector, David, 2004. "Competition and the capital-labor conflict," European Economic Review, Elsevier, vol. 48(1), pages 25-38, February.
    • Handle: RePEc:eee:eecrev:v:48:y:2004:i:1:p:25-38
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    References listed on IDEAS

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    1. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects of Regulation and Deregulation in Goods and Labor Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(3), pages 879-907.
    2. John M. Abowd & Laurence Allain, 1996. "Compensation Structure and Product Market Competition," Annals of Economics and Statistics, GENES, issue 41-42, pages 207-217.
    3. repec:adr:anecst:y:1996:i:41-42:p:09 is not listed on IDEAS
    4. Caballero, Ricardo J. & Hammour, Mohamad L., 1998. "Jobless growth: appropriability, factor substitution, and unemployment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 51-94, June.
    5. Matthew J. Slaughter, 1997. "International Trade and Labor-Demand Elasticities," NBER Working Papers 6262, National Bureau of Economic Research, Inc.
    6. George J. Borjas & Valerie A. Ramey, 1995. "Foreign Competition, Market Power, and Wage Inequality," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(4), pages 1075-1110.
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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