Imperfect goods and labor markets, regulation, and spillover effects

(De)regulatory interventions frequently have unintended cross- market effects, which may or may not be desirable. We assess the effects of three policies on aggregate variables, in particular real income, from a theoretical perspective. Our results suggest that instruments acting upon wages have only a weak impact on real income, whereas the distribution of income is affected strongly. In contrast, a policy that enhances product market competition is fostering real income, but also impacts strongly on union wages and the distribution of income.