Product market deregulation and the US employment miracle

Ebell, Monique; Hæfke, Christian

doi:10.1016/j.red.2008.11.002

Cited by 101 publications

(90 citation statements)

References 44 publications

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“…This finding is in line with the result reached by Ebell and Haefke [2009]. Yet, in our model, all or the major part of the fall in u can be attributed to the increased labor force.…”

Section: Long-run Effectssupporting

confidence: 93%

“…While the empirical literature finds that poor competition in product markets could be a cause of the poor performance of European labor markets, the connection between product market regulation and unemployment has received very little attention from the dynamic general equilibrium literature, except Ebell and Haefke [2009]. 1 In particular, the relationship between product market competition and equilibrium unemployment has been studied by considering a static framework thus abstracting from dynamic effects (see Blanchard and Giavazzi [2003], Spector [2004]).…”

Section: Introductionmentioning

confidence: 99%

“…1 In particular, the relationship between product market competition and equilibrium unemployment has been studied by considering a static framework thus abstracting from dynamic effects (see Blanchard and Giavazzi [2003], Spector [2004]). As Ebell and Haefke [2009], we use a dynamic general equilibrium model to quantify the unemployment effect of regulation in goods market. In contrast to Ebell and Heaefke, we endogenize labor supply along the extensive margin (i.e., the labor force participation decision) and analyze both the dynamic and steady-state effects analytically.…”

Section: Introductionmentioning

confidence: 99%

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Deregulation shock in product market and unemployment

Bertinelli

Cardi

Sen

2013

Journal of Economic Dynamics and Control

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In a dynamic general equilibrium model with endogenous markups and labor market frictions, we investigate the effects of increased product market competition. Unlike most macroeconomic models of search, we endogenize the labor supply along the extensive margin. We show that beneficial effects in labor market outcomes require that the condition for saddle-path stability must be fulfilled whereas instability yields detrimental effects.Additionally, we find numerically that most of the decline in the unemployment rate can be attributed to the increase in the labor force, while the number of job seekers remains fairly unchanged. For a calibration capturing alternatively European and the U.S. labor markets, a deregulation episode, which lowers the markup by 3 percentage points, results in a fall in the unemployment rate by 0.1 and 0.05 percentage point, respectively, while the labor share is almost unaffected in the long-run.

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“…This finding is in line with the result reached by Ebell and Haefke [2009]. Yet, in our model, all or the major part of the fall in u can be attributed to the increased labor force.…”

Section: Long-run Effectssupporting

confidence: 93%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Deregulation shock in product market and unemployment

Bertinelli

Cardi

Sen

2013

Journal of Economic Dynamics and Control

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“…Let the decision rule of n t be n t = φ(s t , n t−1 ). Also define 13 A more realistic treatment would be to consider different firing costs for short-and long-term workers.…”

Section: Establishmentsmentioning

confidence: 99%

Evaluating the effects of entry regulations and firing costs on international income differences

Boedo

Mukoyama

2012

J Econ Growth

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This paper analyzes the effects of entry regulations and firing costs on cross-country differences in income and productivity. We construct a general equilibrium industrydynamics model and quantitatively evaluate it using the cross-country data on entry costs and firing costs. Entry costs lower overall productivity in an economy by keeping lowproductivity establishments in operation and making the establishment size inefficiently large. Firing costs lower productivity by reducing the reallocation of labor from lowproductivity establishments to high-productivity establishments. The linear regression of the data on the model prediction accounts for 27% of the cross-sectional variation in total factor productivity. Moving the level of entry costs and firing costs from the U.S. level to that of the average of low income countries (countries with a Gross National Income below 2% of the U.S. level) reduces TFP by 27% in the model without capital, and by 34% in the model with capital and capital adjustment costs.

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“…25 New entrants finance entry costs by issuing equity on the stock market in this model. See Cacciatore, Ghironi, and Stebunovs (2015) for a version of the entry model based on bank finance.…”

Section: Household Budget Constraint and Intertemporal Decisionsmentioning

confidence: 99%

Short-Term Pain for Long-Term Gain: Market Deregulation and Monetary Policy in Small Open Economies

Cacciatore

Akcigit

Fiori

et al. 2015

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This paper explores the effects of labor and product market reforms in a New Keynesian, small open economy model with labor market frictions and endogenous producer entry. We show that it takes time for reforms to pay off, typically at least a couple of years. This is partly because the benefits materialize through firm entry and increased hiring, both of which are gradual processes, while any reform-driven layoffs are immediate. Some reforms-such as reductions in employment protection-increase unemployment temporarily. Implementing a broad package of labor and product market reforms minimizes transition costs. Importantly, reforms do not have noticeable deflationary effects, suggesting that the inability of monetary policy to deliver large interest rate cuts in their aftermath-either because of the zero bound on policy rates or because of membership in a monetary union-may not be a relevant obstacle to reform. Alternative simple monetary policy rules do not have a large effect on transition costs.

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Product market deregulation and the US employment miracle

Cited by 101 publications

References 44 publications

Deregulation shock in product market and unemployment

Deregulation shock in product market and unemployment

Evaluating the effects of entry regulations and firing costs on international income differences

Short-Term Pain for Long-Term Gain: Market Deregulation and Monetary Policy in Small Open Economies

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