Recently, the interactions between product market structure and labor market outcomes have come under increased
scrutiny. This paper considers the dynamic relationship between product market entry regulation and equilibrium
unemployment and wages, both theoretically and quantitatively. The main elements of our model are Mortensen-
Pissarides-style search and matching frictions, monopolistic competition in the goods market, multi-worker firms
and barriers to entry. Our measure of competition has a strong impact on equilibrium unemployment rates and on
equilibrium wages, indicating that product market competition does indeed have quantitatively significant effects on
labor market outcomes. Most of the impact is achieved by moving from a monopoly to four to five competing firms
per industry. Hence, a little bit of competition goes a long way. Competition is then linked to a specific regulatory
institution, namely barriers to entry. Data on entry costs are used to compare labor market performance under two
regimes: a high-regulation European regime and a low-regulation Anglo-American one.
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