Market Power, Unemployment, and Growth

Book Section (Chapter)

I present a model where firms and workers set wages above the market-clearing level. Unemployment is thus generated by their exercise of market power. Because both the labor and product markets are imperfectly competitive, market power in the labor market interacts with market power in the product market. This interaction sheds new light on the effects of policy interventions on unemployment and growth. For example, labor market reforms that reduce labor costs reduce unemployment and boost growth because they expand the scale of the economy and generate more competition in the product market.

Full Text

Duke Authors

Cited Authors

  • Peretto, PF

Cited Editors

  • de La Grandville, O; Choi, EK

Published Date

  • 2012

Book Title

  • Frontiers of Economic Growth and Development


  • 19

Start / End Page

  • 493 - 525

Published By

Place of Publication

  • Great Britain


  • 32

International Standard Book Number 13 (ISBN-13)

  • 978-1-78052-396-5

Digital Object Identifier (DOI)

  • 10.1108/S1574-8715(2011)0000011024