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Has the Globalisation really generated more competition in OECD economies

Jambu, Marc-Antoine (2010): Has the Globalisation really generated more competition in OECD economies.

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Abstract

Since the 1970's, firms struture have changed to fit the Globalization of the Market. Some firms have suffered from increased competition, whereas others, generally big ones in the Business to Consumer sector, have enjoyed a decrease in competition. The market power of firms can affect the monetary policy trade-off between output volatility and price volatility. This trade-off is generally studied with the New Keynesian Philips Curve equation, which can be obtained by assuming Calvo or Rotemberg price setting assumptions. Both can involved a market power parameter. But the Calvo model fails to predict the increase of price volatility on markets, like manufactured goods, where competition has denitively increased. By using the Rotemberg assumption and modelling firms according to the Theory of rm Literature, the model generates the Great Moderation, only if we assume a global rise of the markup in OECD economies since the beginning of the 1980's. It also generates two other stylized facts since the beginning of the 1980's: a rise in wage variability and in labor variability relative to output variability. This simple model replicates a value of the NKPC quite close from empirical estimations since the 1990's. The model steady state with a higher value of mark-up since 1980 supports the fact that inequalities are higher since the Great Moderation. To finish, it gives a simple explanation for the barely growth of median wage compare to the growth of global productivity.

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