In Search of the Effects of Competition on Unemployment: Evidence from OECD Countries

Abstract

This paper explores the empirical relationship between unemployment rate and product market competition in eighteen OECD countries through three sets of quantitative analyses. We find that the effect of competition on employment depends on the existing competition intensity and the relationship between the unemployment and competition appears to be inverted-N shape—in countries where existing competition intensity is either high or low, an increase in competition tends to reduce unemployment rate significantly; but for countries where existing competition intensity is moderate, intensified competition is more likely to increase unemployment rate significantly.