Monopsony and Employment Inflows. A Microeconometric Analysis Based on a Panel of Belgian Firms

It is often asserted among economists that regulation prevents wage adjustment process towards equilibrium by pushing wages above their equilibrium level. Therefore, a way to get rid of unemployment is to deregulate the market, leading to a perfect competition state with no unvoluntary unemployment and each worker being paid a wage equal to his marginal productivity. The basic reason for some economists to consider that deregulation could succeed often comes from the idea that a main cause to unemployment, from an unperfect competition point of view, is related to union bargaining power (Lindbeck and Snower, 1989). Deregulation could reduce this power through reforming the social security or the employment protection systems, abandoning or reducing minimum wages.