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Working Paper No. 520

Cumulative Effects of Labor Market Distortions

Working Paper
Referens
Norbäck, Pehr-Johan (1999). ”Cumulative Effects of Labor Market Distortions ”. IFN Working Paper nr 520. Stockholm: Institutet för Näringslivsforskning.

Författare
Pehr-Johan Norbäck

This paper considers a small open economy whit an input-output industrial structure that creates vertical linkages multiple equilibria. An imperfect labor market is introduced by assuming unionized labor. It is shown that a deregulation of the labor market may trigger a large, discontinuous expansion of industrial output, as reduced wage-costs start a circular, cumulative process in which expansions of the up- and downstream industries promote each other. Centralization of collective bargaining may, however, also be conductive to industrialization.

Pehr-Johan Norbäck

+46 (0)8 665 4522
+46 (0)73 574 3379
pehr-johan.norback@ifn.se