IDEAS home Printed from https://ideas.repec.org/a/oup/oxecpp/v61y2009i3p517-537.html
   My bibliography  Save this article

Dynamic effects of regulation and deregulation in goods and labour markets

Author

Listed:
  • Pasquale Commendatore
  • Ingrid Kubin

Abstract

It has been argued in recent economic literature that deregulation in both product and labour markets has beneficial impacts on employment and on real wages. The results offered to support this argument, however, are controversial. So far the debate has been concerned with comparative static results. This paper reassesses the consequences of deregulation in a dynamic context. In our model—a dynamic counterpart of Blanchard and Giavazzi's prototype model—liberalisation in product and/or labour markets also increases the equilibrium employment and wage rates. However, with boundedly rational firms and trade unions, deregulation may generate endogenous fluctuations. Copyright 2009 , Oxford University Press.

Suggested Citation

  • Pasquale Commendatore & Ingrid Kubin, 2009. "Dynamic effects of regulation and deregulation in goods and labour markets," Oxford Economic Papers, Oxford University Press, vol. 61(3), pages 517-537, July.
    • Handle: RePEc:oup:oxecpp:v:61:y:2009:i:3:p:517-537
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/oep/gpn019
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Claude d'Aspremont & Rodolphe Dos Santos Ferreira & Louis-André Gérard-Varet, 1990. "On Monopolistic Competition and Involuntary Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 895-919.
    2. 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.
    3. d'Aspremont, Claude & Dos Santos Ferreira, Rodolphe & Gerard-Varet, Louis-Andre, 1996. "On the Dixit-Stiglitz Model of Monopolistic Competition," American Economic Review, American Economic Association, vol. 86(3), pages 623-629, June.
    4. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January.
    5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    6. Jin, Jim Y., 2001. "Monopolistic competition and bounded rationality," Journal of Economic Behavior & Organization, Elsevier, vol. 45(2), pages 175-184, June.
    7. Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-666, September.
    8. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    9. Lars Calmfors & Åsa Johansson, 2001. "Unemployment Benefits, Contract Length and Nominal Wage Flexibility," CESifo Working Paper Series 514, CESifo.
    10. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
    11. Heijdra, Ben J. & Ligthart, Jenny E., 1997. "Keynesian Multipliers, Direct Crowding Out, and the Optimal Provision of Public Goods," Journal of Macroeconomics, Elsevier, vol. 19(4), pages 803-826, October.
    12. Calmfors, Lars & Johansson, Åsa, 2001. "Unemployment Benefits, Contract Length And Nominal Wage Flexibility," Seminar Papers 692, Stockholm University, Institute for International Economic Studies.
    13. Heijdra, Ben J & Ligthart, Jenny E & van der Ploeg, Frederick, 1998. "Fiscal Policy, Distortionary Taxation, and Direct Crowding Out under Monopolistic Competition," Oxford Economic Papers, Oxford University Press, vol. 50(1), pages 79-88, January.
    14. Dixit, Avinash K & Stiglitz, Joseph E, 1993. "Monopolistic Competition and Optimum Product Diversity: Reply," American Economic Review, American Economic Association, vol. 83(1), pages 302-304, March.
    15. Nickell, Stephen J, 1990. "Unemployment: A Survey," Economic Journal, Royal Economic Society, vol. 100(401), pages 391-439, June.
    16. d ASPREMONT, Claude, & DOS SANTOS FERREIRA , Rodolphe & GERARD-VARET , Louis-André, 1994. "Market Power, Coordination Failures and Endogenous Fluctuations," LIDAM Discussion Papers CORE 1994068, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Noemi Schmitt & Jan Tuinstra & Frank Westerhoff, 2018. "Stability and welfare effects of profit taxes within an evolutionary market interaction model," Review of International Economics, Wiley Blackwell, vol. 26(3), pages 691-708, August.
    2. Tuinstra, Jan & Wegener, Michael & Westerhoff, Frank, 2013. "Positive welfare effects of trade barriers in a dynamic equilibrium model," BERG Working Paper Series 91, Bamberg University, Bamberg Economic Research Group.
    3. FRANCESCO FELICI & Barbara Annicchiarico & Fabio Di Dio, 2012. "Structural Reforms and the Potential Effects on the Italian Economy," EcoMod2012 5073, EcoMod.
    4. Annicchiarico, Barbara & Di Dio, Fabio & Felici, Francesco, 2013. "Structural reforms and the potential effects on the Italian economy," Journal of Policy Modeling, Elsevier, vol. 35(1), pages 88-109.
    5. Tuinstra, Jan & Wegener, Michael & Westerhoff, Frank, 2014. "Positive welfare effects of trade barriers in a dynamic partial equilibrium model," Journal of Economic Dynamics and Control, Elsevier, vol. 48(C), pages 246-264.
    6. Barbara Annicchiarico & Fabio Di Dio & Francesco Felici, "undated". "The Macroeconomics of Europe 2020 Reform Strategy and the Potential Effects on the Italian Economy," Working Papers 8, Department of the Treasury, Ministry of the Economy and of Finance.
    7. Valentin Marian ANTOHI & Monica Laura ZLATI, 2018. "The impact of profit taxation on the financial solvency of economic agents," Risk in Contemporary Economy, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, pages 43-55.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ottaviano, Gianmarco & Thisse, Jacques-François, 1999. "Monopolistic Competition, Multiproduct Firms and Optimum Product Diversity," CEPR Discussion Papers 2151, C.E.P.R. Discussion Papers.
    2. Etro, Federico, 2017. "Research in economics and monopolistic competition," Research in Economics, Elsevier, vol. 71(4), pages 645-649.
    3. Pierre M. Picard & Eric Toulemonde, 2009. "On monopolistic competition and optimal product diversity: workers' rents also matter," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(4), pages 1347-1360, November.
    4. Brito, Paulo B. & Costa, Luís F. & Dixon, Huw, 2013. "Non-smooth dynamics and multiple equilibria in a Cournot–Ramsey model with endogenous markups," Journal of Economic Dynamics and Control, Elsevier, vol. 37(11), pages 2287-2306.
    5. Pierre M. Picard & Eric Toulemonde, 2005. "On Monopolistic Competition and Optimal Product Diversity: a Comment on Cost Structure and Workers' Rents," Cahiers de Recherches Economiques du Département d'économie 05.02, Université de Lausanne, Faculté des HEC, Département d’économie.
    6. Julien, Ludovic A., 2011. "Unemployment equilibrium and economic policy in mixed markets," Economic Modelling, Elsevier, vol. 28(4), pages 1931-1940, July.
    7. Coto-Martinez, Javier, 2006. "Public capital and imperfect competition," Journal of Public Economics, Elsevier, vol. 90(1-2), pages 349-378, January.
    8. d’Aspremont, Claude & Dos Santos Ferreira, Rodolphe, 2017. "The Dixit–Stiglitz economy with a ‘small group’ of firms: A simple and robust equilibrium markup formula," Research in Economics, Elsevier, vol. 71(4), pages 729-739.
    9. Giovanni Di Bartolomeo, 2014. "Optimal Degree of Union Centralization," Studies in Microeconomics, , vol. 2(2), pages 201-211, December.
    10. Allan Sørensen, 2010. "Welfare Effects of Trade Liberalization with Intra-industry Reallocations: The Importance of Preferences and Market Failures," Economics Working Papers 2010-02, Department of Economics and Business Economics, Aarhus University.
    11. BEHRENS, Kristian & MURATA, Yasusada, 2005. "General equilibrium models of monopolistic competition: CRRA versus CARA," LIDAM Discussion Papers CORE 2005033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    12. Kim, Jinill, 2004. "What determines aggregate returns to scale?," Journal of Economic Dynamics and Control, Elsevier, vol. 28(8), pages 1577-1594, June.
    13. Alexandre Janiak & Paulo Santos Monteiro, 2011. "Inflation and Welfare in Long‐Run Equilibrium with Firm Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(5), pages 795-834, August.
    14. Redding, Stephen J. & Weinstein, David E., 2016. "A unified approach to estimating demand and welfare," LSE Research Online Documents on Economics 67681, London School of Economics and Political Science, LSE Library.
    15. Pasquale Commendatore & Ingrid Kubin, "undated". "The dynamics of wages and employment in a model of monopolistic competition and efficient bargaining," Modeling, Computing, and Mastering Complexity 2003 03, Society for Computational Economics.
    16. Lockwood, Ben, 2003. "Imperfect competition, the marginal cost of public funds and public goods supply," Journal of Public Economics, Elsevier, vol. 87(7-8), pages 1719-1746, August.
    17. Matthias Strifler & Thomas Beissinger, 2016. "Fairness Considerations in Labor Union Wage Setting – A Theoretical Analysis," Scottish Journal of Political Economy, Scottish Economic Society, vol. 63(3), pages 303-330, July.
    18. Simone Moriconi & Pierre M. Picard & Skerdilajda Zanaj, 2019. "Commodity taxation and regulatory competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(4), pages 919-965, August.
    19. Alberto Bucci & Philip Ushchev, 2016. "Specialization vs Competition: An Anatomy of Increasing Returns to Scale," HSE Working papers WP BRP 134/EC/2016, National Research University Higher School of Economics.
    20. Parenti, Mathieu & Ushchev, Philip & Thisse, Jacques-François, 2017. "Toward a theory of monopolistic competition," Journal of Economic Theory, Elsevier, vol. 167(C), pages 86-115.

    More about this item

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:oxecpp:v:61:y:2009:i:3:p:517-537. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/oep .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.