Working Paper Series
Cumulative Effects of Labor Market Distortions in a Developing Country
Abstract: This paper considers a small open economy with an
input-output industrial structure that creates vertical linkages and
multiple equilibria. An imperfect labor market is introduced by assuming
unionized labor. It is shown that a deregulation of the labor market may
trigger a large discontinuous expansion of industrial output, as reduced
wage-costs start a circular, cumulative process in which expansions of the
up-and downstream industries promote each other. Centralization of
collective bargaining may, however, also be conductive to
Keywords: Vertical linkages; Multiple equilibria; Labor unions; (follow links to similar papers)
JEL-Codes: F12; J50; O11; (follow links to similar papers)
23 pages, January 19, 1999, Revised January 10, 2001
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Full text versions of the paper:
- This paper is forthcoming as:
Norbäck, Pehr-Johan, 'Cumulative Effects of Labor Market Distortions in a Developing Country', Journal of Developing Economics.
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