A Less Perfect World: Market Rents and Redistributive Conflict

Gilles Saint‐Paul

in The Political Economy of Labour Market Institutions

Published in print September 2000 | ISBN: 9780198293323
Published online November 2003 | e-ISBN: 9780191596841 | DOI:
 A Less Perfect World: Market Rents and Redistributive Conflict

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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

Chapter.  10141 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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