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Product Market Reforms, Labour Market Institutions and Unemployment

Rachel Griffith, Rupert Harrison and Gareth Macartney
The Economic Journal
Vol. 117, No. 519, Conference Papers (Mar., 2007), pp. C142-C166
Published by: Wiley on behalf of the Royal Economic Society
Stable URL: http://www.jstor.org/stable/4625503
Page Count: 25
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Product Market Reforms, Labour Market Institutions and Unemployment
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Abstract

We analyse the impact of product market competition on unemployment, and how this depends on labour market institutions. Theoretically, both firms with market power and unions with bargaining power are constrained in their behaviour by the elasticity of demand in the product market. We use differential changes in regulations across OECD countries over the 1980s and 1990s to identify the effects of competition. We find that increased competition reduces unemployment, more so in countries with labour market institutions that increase worker bargaining power. We also find that competition increases real wages but less so when bargaining power is high.

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