Resource title

Equilibrium Unemployment and Investment Under Product and Labour Market Imperfections

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image for OpenScout resource :: Equilibrium Unemployment and Investment Under Product and Labour Market Imperfections

Resource description

We study the implications of product market competition and investment for price setting, wage bargaining and thereby for equilibrium unemployment in an economy with product and labour market imperfections. We show that intensified product market competition will reduce equilibrium unemployment, whereas the effect of increased capital intensity is more complex. Higher capital intensity will decrease the equilibrium unemployment when the elasticity of substitution between capital and labour is less than one, while the reverse happens when this elasticity is higher than one but smaller than the elasticity of substitution between products. Finally, we demonstrate how labour and product market imperfections, characterized by the wage and price setting mark-ups, affect the optimal capital stock. Our findings raise important questions for future empirical research.

Resource author

Heikki Kauppi, Erkki Koskela, Rune Stenbacka

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/20293

Resource license

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