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Can Market Power Influence Employment, Wage Inequality and Growth?Alberto BucciUniversity of Milan - Dipartimento di Economia Politica e Aziendale (DEPA) Fabio FiorilloUniversità Politecnica delle Marche - Faculty of Economics Stefano StaffolaniUniversità Politecnica delle Marche - Faculty of Economics January 26, 2001 Abstract: We introduce an efficiency-wage mechanism into an innovation-driven growth model. Due to informational problems, the labor market is segmented and homogeneous workers may be employed either in a non-competitive intermediate sector or in a competitive research one. We analyze the impact that variations in the monopoly power of the intermediate firms may have on unemployment, wage inequality and growth. We find that the lower the product market competition in the intermediate sector, the higher the research employment, the lower the intermediate sector employment, the higher the aggregate growth rate. Growth and inequality are negatively correlated whereas growth and unemployment are positively correlated. The last two results are obtained through numerical simulations.
Number of Pages in PDF File: 26 Keywords: Efficiency wages, research and development, endogenous growth, market power JEL Classification: D43, D92, J41, O3 working papers seriesDate posted: August 13, 2001Suggested CitationContact Information
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