Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211975 
Year of Publication: 
2004
Series/Report no.: 
Bank of Finland Discussion Papers No. 7/2004
Publisher: 
Bank of Finland, Helsinki
Abstract: 
We ask which part of the observed cross-country differences in the level of per capita income can be accounted for by monopoly rights in the labour market.We answer this question in a calibrated growth model with two final goods sectors.The novel feature being that monopoly rights in the capital-producing sector shield insiders from competition by outsiders and permit coalitions of insiders to choose inefficient technologies or working practices. We find that monopoly rights can lead to quantitatively much larger reductions in the level of per capita income than previously demonstrated.This comes about because they do not only reduce TFP in capital-producing sector but also increase the relative price of capital.This reduces the capital-labour ratio in the whole economy.The implied predictions about the price of capital goods relative to consumption goods and the investment share in output are quantitatively consistent with the cross-country facts.
Subjects: 
cross-country income differences
cross-country productivity differences
monopoly rights
relative price of capital
capital accumulation
JEL: 
E00
Persistent Identifier of the first edition: 
ISBN: 
952-462-126-6
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.