Resource title

Product market competition, profit sharing and equilibrium unemployment

Resource image

image for OpenScout resource :: Product market competition, profit sharing and equilibrium unemployment

Resource description

We investigate the implications of product market imperfections on profit sharing, wage negotiation and equilibrium unemployment. The optimal profit share, which the firms use as a wage-moderating commitment device, is below the bargaining power of the trade union. Intensified product market competition decreases profit sharing, but increases the negotiated base wage, because the wage-increasing effect of reduced profit sharing dominates the wage-reducing effect associated with a higher wage elasticity of labor demand. Finally, we show that intensified product market competition does not necessarily reduce equilibrium unemployment, because it induces both higher wage mark-ups and lower optimal profit shares.

Resource author

Erkki Koskela, Rune Stenbacka

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/19067

Resource license

Adapt according to the presented license agreement and reference the original author.