Can Market Power Influence Employment, Wage Inequality and Growth?

26 Pages Posted: 13 Aug 2001  

Alberto Bucci

University of Milan - Department of Business Policy and Economics

Fabio Fiorillo

Università Politecnica delle Marche - Faculty of Economics

Stefano Staffolani

Università Politecnica delle Marche - Faculty of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: 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.

Keywords: Efficiency wages, research and development, endogenous growth, market power

JEL Classification: D43, D92, J41, O3

Suggested Citation

Bucci, Alberto and Fiorillo, Fabio and Staffolani, Stefano, Can Market Power Influence Employment, Wage Inequality and Growth? (January 26, 2001). Available at SSRN: https://ssrn.com/abstract=279822 or http://dx.doi.org/10.2139/ssrn.279822

Alberto Bucci (Contact Author)

University of Milan - Department of Business Policy and Economics ( email )

Via Mercalli, 23
20122-Milano
Italy
+39(0)2 50321.463 (Phone)
+39(0)2 50321.505 (Fax)

Fabio Fiorillo

Università Politecnica delle Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

Stefano Staffolani

Università Politecnica delle Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

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