High unemployment in many European OECD countries has been attributed to factors ranging from rigid wages and low job mobility to an interaction of high taxes and generous social benefits that may discourage labor force participation and encourage the growth of an underground economy. This...

The welfare cost of imperfect competition in the product and labor market as well as distortionary taxation is quantified in a dynamic general equilibrium model parameterized to fit the U.S. economy. We find that the welfare cost of imperfect competition in the product market is 35.74 percent...