Profit Sharing, Credit Market Imperfections and Equilibrium Unemployment
We investigate the interaction between labour and credit market imperfections for equilibrium unemployment in the presence of profit sharing. In a partial equilibrium with exogenous outside options, increased bargaining power of banks has adverse employment effects. In a general equilibrium with endogenous outside options, this relationship is frequently reversed; reduced credit market imperfections increase equilibrium unemployment if the labour market imperfections-measured by the bargaining power of trade unions-are sufficiently strong and the benefit-replacement ratio is sufficiently high. Finally, we show that higher bankruptcy risks increase equilibrium unemployment under similar conditions. Copyright The editors of the "Scandinavian Journal of Economics", 2004 .
Year of publication: |
2004
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Authors: | Koskela, Erkki ; Stenbacka, Rune |
Published in: |
Scandinavian Journal of Economics. - Wiley Blackwell, ISSN 1467-9442. - Vol. 106.2004, 4, p. 677-701
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Publisher: |
Wiley Blackwell |
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