TY  - RPRT
        AU  - Kauppi, Heikki
AU  - Koskela, Erkki
AU  - Stenbacka, Rune
        TI  - Equilibrium Unemployment and Investment Under Product and Labour Market Imperfections
        PY  - 2004/Mar/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1058
        UR  - https://www.iza.org/index.php/publications/dp1058
        AB  - We study the implications of product market competition and investment for price setting,
wage bargaining and thereby for equilibrium unemployment in an economy with product and
labour market imperfections. We show that intensified product market competition will reduce
equilibrium unemployment, whereas the effect of increased capital intensity is more complex.
Higher capital intensity will decrease the equilibrium unemployment when the elasticity of
substitution between capital and labour is less than one, while the reverse happens when this
elasticity is higher than one but smaller than the elasticity of substitution between products.
Finally, we demonstrate how labour and product market imperfections, characterized by the
wage and price setting mark-ups, affect the optimal capital stock. Our findings raise important
questions for future empirical research.
        KW  - equilibrium unemployment
KW  - product market imperfections
KW  - investment
KW  - wage bargaining
        ER  -