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Title:Profit Sharing, Credit Market Imperfections and Equilibrium Unemployment PDF Logo
Authors:Koskela, Erkki
Stenbacka, Rune
Issue Date:2004
Series/Report no.:IZA Discussion paper series 1020
Abstract: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 benefit-replacement ratio high enough. Finally, we show that higher bankruptcy risks increase equilibrium unemployment under similar conditions.
Subjects:wage and loan bargaining
compensation systems
equilibrium unemployment
outside options
JEL:G32
J41
J51
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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