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Labor and product market reforms: questioning policy complementarity

Abstract : This article proposes a dynamic efficiency wages model with imperfect competition on labor and product markets. In this framework, job insecurity generates a perverse effect on workers incentives, which shifts up the real wages schedule and may yield employment losses. Product market regulation and redundancy payments contribute to reducing labor turnover, thus easing the workers incentive constraint. Consequently, and against conventional wisdom, regulations may have a positive impact on employment, and a substitution effect may emerge across deregulation policies. Moreover, in some cases, a complementarity arises between regulations in product and labor markets, both interacting to ensure more stable labor relations.
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Contributor : Bruno Amable <>
Submitted on : Wednesday, October 3, 2007 - 2:17:07 PM
Last modification on : Tuesday, January 19, 2021 - 11:08:28 AM

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Bruno Amable, Donatella Gatti. Labor and product market reforms: questioning policy complementarity. Industrial and Corporate Change, Oxford University Press (OUP), 2006, 15 (1), pp.101-122. ⟨10.1093/icc/dtj004⟩. ⟨halshs-00176386⟩



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