Mar
27th
Fri
27th
In less competitive markets, firms earn excessive profits and restrict both output and employment. Such conditions create a classic “insider-outsider” conflict, where unions strive to extract a share of the rents on behalf of the “insiders” (workers in permanent employment), but at the expense of the “outsiders” (the unemployed and those in “atypical” employment). And lowering the rents arising from uncompetitive markets through product market deregulation would also ease subsequent labor market reforms. Another advantage of addressing labor market problems via the product market is that such reforms do not imply a cost for the budget—of special importance for Italy given its exceptionally weak public finances.
