Market power, growth, and unemployment

Scholarly Edition

I present a model where firms and workers set wages above the marketclearing 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. © 2011 by Emerald Group Publishing Limited. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Peretto, PF

Published Date

  • January 1, 2011

Start / End Page

  • 493 - 525

International Standard Book Number 13 (ISBN-13)

  • 9781780523965

Digital Object Identifier (DOI)

  • 10.1108/S1574-8715(2011)0000011024

Citation Source

  • Scopus