Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/76643
Authors: 
Delfgaauw, Josse
Dur, Robert
Year of Publication: 
2003
Series/Report no.: 
CESifo Working Paper 1095
Abstract: 
This paper examines the consequences of creating a fully competitive market in a sector previously dominated by a cost-minimising public firm. Workers in the economy are heterogeneous in their motivation to work in the sector. In line with empirical findings, our model implies that firms in the competitive market provide stronger monetary incentives to workers, reach higher productivity, and employ less workers than the public firm. Allocative efficiency therefore increases. Nevertheless, prices of the sector's output rise as competition between private firms for the best motivated workers leads to higher wage cost than under the public monopsony. Political support for liberalisation may therefore be limited.
Subjects: 
liberalisation
monopsony power
incentive wages
intrinsic motivation
JEL: 
H40
J30
J40
L20
L30
L50
Document Type: 
Working Paper

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