A1260
Title: A model of market and political power interactions for Southern Europe
Authors: Tryphon Kollintzas - Athens University of Economics and Business and CEPR (Greece)
Dimitris Papageorgiou - Bank of Greece (Greece)
Vanghelis Vassilatos - Research Centre of the Athens University of Economics and Business (RC/AUEB) (Greece) [presenting]
Abstract: In recent years the growth pattern of most Southern European countries has been disturbed, as those countries are suffering from economic crises that go beyond the usual business cycle. We develop a dynamic general equilibrium model of market and political power interactions that explains this growth reversal. The model is a synthesis of the insiders-outsiders labor market structure and the concept of an elite government. Outsiders form a group of workers that supply labor to a competitive private sector. And insiders form a group of workers that enjoy market power in supplying labor to the public sector and influence the policy decisions of government, including those that affect the development and maintenance of public sector infrastructures.
