آزادسازی بازار محصول و معجزه استخدام ایالات متحده

We consider the dynamic relationship between product market entry regulation and equilibrium unemployment. The main theoretical contribution is combining a job matching model with monopolistic competition in the goods market and individual bargaining. We calibrate the model to US data and perform a policy experiment to assess whether the decrease in trend unemployment during the 1980s and 1990s could be directly attributed to product market deregulation. Under our baseline calibration, our results suggest that a decrease of less than two-tenths of a percentage point of unemployment rates can be attributed to product market deregulation, a surprisingly small amount.

This paper studies the impact of product market deregulation on labor markets, with special emphasis on the Carter/Reagan deregulation of the late 1970s and early 1980s. There has been quite some interest recently in the impact of product market institutions on labor markets. However, the focus of this literature has been to use differences in US and European product market regulation to try to explain the divergent performance of US and European labor markets over the 1980s and 1990s. One obstacle faced by this literature is that the presence of a multitude of rigidities (and attempts at reform) in European labor markets makes it difficult to disentangle the roles of product and labor market institutions in accounting for high European unemployment rates. In contrast, the US labor market is both highly flexible and its institutions were more stable during the period of interest(Fig. 2). This allows us to focus only on changes in product market regulation, while holding labor market institutions constant. Consider the graph of HP-trend unemployment rates1 in Fig. 1. US unemployment rates began trending downward in the early 1980s, falling from a peak of 7.6% in 1982 to only 5.0% in 2000. The deregulation of US product markets runs parallel to this decrease in unemployment, as shown by the OECD data on product market regulation plotted in Fig. 1. This, together with the fact that deregulation took place around the time of the trend reversal in unemployment, makes it worth investigating whether product market deregulation could explain what has widely been termed the ‘employment miracle’ (Krueger and Pischke, 1997).2

The main objective of this paper has been to study the relationship between product market regulation and labor market outcomes. Our main contribution is twofold. First, we develop a dynamic model with imperfect competition and search frictions, which is well suited for the quantitative analysis of the present paper. Our model contains the interesting featurethat the standard monopoly distortion of underproduction is partially offset by an overhiring incentive, especially when monopoly power is high. We then use our model to ask whether the Carter/Reagan deregulation of the late 1970s and early 1980s could account for the subsequent decline in US trend unemployment rates. Surprisingly, in the baseline traditional calibration, the answer is no. Under the traditional calibration, increasing entry costs from their 1998 to their 1978 levels results in a very small increase in unemployment of less than two-tenths of one percentage point. Under an alternative small surplus calibration, in contrast, the same increase in entry costs leads to an increase of 2.1 percentage points in unemployment, accounting for the entire difference in HP-trend unemployment between 1978 and 1998. We also interact product market deregulation with tax reform and a possible decline in worker’s bargaining power. We find that our result that product market deregulation is unable to account for most of the decline in unemployment is robust to the inclusion of tax reform and declining worker’s bargaining power. In order to account for the full 2.1 percentage point decline in trend unemployment, labor taxes would have had to decrease from 56.6% in 1978 to 32.0% in 1998, or worker’s bargaining power would have had to decline from 66.6% in 1978 to 50% in 1998. In either case, the direct contribution from deregulation remains less than 20% of the entire differential. These theoretical findings are in line with the empirical results of Fiori et al. (2007) who find no significant employment effect of product market deregulation in countries where labor market policies are loose. This observation leads us to expect stronger effects for the more heavily regulated European economies. Finally, we find that product market regulation could lead to modest increases in real wages, providing some support for the political economy arguments in favor of combining labor and product market reform found in Blanchard and Giavazzi (2003).