Product market deregulation and the US employment miracle |
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| Authors: | Monique Ebell Christian Haefke |
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| Affiliation: | aDepartment of Economics and Business Studies, Humboldt University of Berlin, Germany;bCentre for Economic Performance at the London School of Economics and Political Science, United Kingdom;cDepartment of Economics and Finance, Institute for Advanced Studies (IHS), Stumpergasse 56, A-1060 Vienna, Austria;dInstituto de Análisis Económico, CSIC, Barcelona, Spain;eIZA, Germany |
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| Abstract: | We consider the dynamic relationship between product market entry regulation and equilibrium unemployment. The main theoretical contribution is combining a job matching model with monopolistic competition in the goods market and individual bargaining. We calibrate the model to US data and perform a policy experiment to assess whether the decrease in trend unemployment during the 1980s and 1990s could be directly attributed to product market deregulation. Under our baseline calibration, our results suggest that a decrease of less than two-tenths of a percentage point of unemployment rates can be attributed to product market deregulation, a surprisingly small amount. |
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| Keywords: | Product market competition Barriers to entry Wage bargaining |
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