Endogenous Market Structures and Labour Market Dynamics

Colciago, Andrea; Rossi, Lorenza

doi:10.2139/ssrn.1858757

Endogenous Market Structures and Labour Market Dynamics

Bank of Finland Research Discussion Paper No. 12/2011

51 Pages Posted: 7 Jun 2011

See all articles by Andrea Colciago

Andrea Colciago

De Nederlandsche Bank - Research Department; Università degli Studi di Milano-Bicocca - Department of Economics, Management and Statistics (DEMS); Università degli Studi di Milano-Bicocca - Center for European Studies (CefES)

Lorenza Rossi

University of Rome Tor Vergata - Faculty of Economics; National Institute of Statistics (Istat)

Date Written: May 19, 2011

Abstract

We propose a flexible prices model where endogenous market structures and search and matching frictions in the labour market interact endogenously. The interplay between firms’ endogenous entry, strategic interactions among producers and labour market frictions represents a strong amplification channel for technology shocks on labour market variables and helps in addressing the unemployment- volatility puzzle. Consistently with US evidence, new firms create a large fraction of new jobs and grow faster than more mature firms, net entry of firms is procyclical and the price mark-up is countercyclical.

Keywords: endogenous market structures, firms’ entry, search and matching, friction

JEL Classification: E24, E32, L11

Suggested Citation: Suggested Citation

Colciago, Andrea and Rossi, Lorenza, Endogenous Market Structures and Labour Market Dynamics (May 19, 2011). Bank of Finland Research Discussion Paper No. 12/2011, Available at SSRN: https://ssrn.com/abstract=1858757 or http://dx.doi.org/10.2139/ssrn.1858757