International Political Spillovers: The Case of Labour Market Regulation

Pica, Giovanni (2003) International Political Spillovers: The Case of Labour Market Regulation. European University Institute Florence. European Forum. Robert Schuman Centre for Advanced Studies. Working Papers, (12), 1-29. (doi:10.2139/ssrn.497863).


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This paper explores how the political support for Labor Market Regulation (LMR) is affected by economic and political integration in a two-country overlapping generations model where countries behave strategically. We model LMR as wage regulation and analyze three institutional settings: Autarchy, Economic Union and Political Union.

We show that, if the economy is dynamically efficient, the support for labor regulation is lower in the Economic Union - characterized by capital mobility - than in Autarchy. This decreases the welfare of the owners of the less mobile factor (labor) even in a setting where today workers are next period capitalists. A Political Union restores, under symmetry, the autarchic outcomes and welfare levels. The asymmetric case is also analyzed.

Item Type: Article
Digital Object Identifier (DOI): doi:10.2139/ssrn.497863
Related URLs:
Keywords: under-employment, factor mobility, political integration, olg model, dynamic efficiency, factor shares, political economy, economic integration, globalization
Subjects: J Political Science > JA Political science (General)
H Social Sciences > HV Social pathology. Social and public welfare
Divisions: University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 33416
Date :
Date Event
Date Deposited: 16 May 2006
Last Modified: 06 Aug 2015 02:30

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