Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/20255
Authors: 
Koskela, Erkki
Stenbacka, Rune
Year of Publication: 
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

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