Skip to main content

CEP discussion paper

Product Market Deregulation and the U.S. Employment Miracle


We consider the dynamic relationship between product market entry regulation and equilibrium unemployment. The main theoretical contribution is combining a job matching model with monopolistic competition in the goods market and individual bargaining. We calibrate the model to US data and perform a policy experiment to assess whether the decrease in trend unemployment during the 1980's and 1990's could be attributed to product market deregulation. Under a traditional calibration, our results suggest that a decrease of less than two-tenths of a percentage point of unemployment rates can be attributed to product market deregulation, a surprisingly small amount. Under a small surplus calibration, however, product market deregulation can account for the entire decline in US trend unemployment over the 1980's and 1990's.


Monique Ebell and Christian Haefke

June 2008     Paper Number CEPDP0874

Download PDF - Product Market Deregulation and the U.S. Employment Miracle

This CEP discussion paper is published under the centre's programme.