Product Market Deregulation and the U.S. Employment Miracle

Abstract

Product Market Deregulation and the U.S. Employment Miracle 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 wage bargaining. Product market competition affects unemployment by two channels: the output expansion effect and a countervailing effect due to a hiring externality. Competition is then linked to barriers to entry. We calibrate the model to US data and perform a policy experiment to assess whether the decrease in trend unemployment during the 1980’s and 1990’s could be attributed to product market deregulation. Our quantitative analysis suggests that under individual bargaining, 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. JEL Classification: E24, J63, L16, O00

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@inproceedings{Ebell2006ProductMD, title={Product Market Deregulation and the U.S. Employment Miracle}, author={Monique C. Ebell and Christian Haefke and Employment Miracle and Philippe Bacchetta and Olivier Jean Blanchard and Jan Boone and Michael C . Burda and Antonio Cabrales and Jordi Gal{\'i} and Adriana D. Kugler and Pietro F. Peretto}, year={2006} }