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The Political Economy of Labour Market Institutions$
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Gilles Saint-Paul

Print publication date: 2000

Print ISBN-13: 9780198293323

Published to Oxford Scholarship Online: November 2003

DOI: 10.1093/0198293321.001.0001

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A Less Perfect World: Market Rents and Redistributive Conflict

A Less Perfect World: Market Rents and Redistributive Conflict

(p.45) 2 A Less Perfect World: Market Rents and Redistributive Conflict
The Political Economy of Labour Market Institutions

Gilles Saint‐Paul

Oxford University Press

We show how in a heterogeneous labour market, a group of workers may benefit from rigid institutions. This is because they allow it to collectively exploit monopoly power at the expense of other groups that are complementary in production. It is shown that if rigidity arises, it is likely to be associated with employee rents. The greater the rent the fewer are the workers are exposed to unemployment and lower is the elasticity of labour demand. In some cases, rigidities are favoured over fiscal transfers because they are sustained by a larger coalition, including members of the taxed group.

Keywords:   elasticity, exposure, external conflict, fiscal transfers, internal conflict, minimum wage, unemployment

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