International Political Spillovers: The Case of Labour Market Regulation
International Political Spillovers: The Case of Labour Market Regulation
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.
under-employment, factor mobility, political integration, olg model, dynamic efficiency, factor shares, political economy, economic integration, globalization
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Pica, Giovanni
b040ac62-6055-4724-a6bf-eab1efc22915
2003
Pica, Giovanni
b040ac62-6055-4724-a6bf-eab1efc22915
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), .
(doi:10.2139/ssrn.497863).
Abstract
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.
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Published date: 2003
Keywords:
under-employment, factor mobility, political integration, olg model, dynamic efficiency, factor shares, political economy, economic integration, globalization
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Local EPrints ID: 33416
URI: http://eprints.soton.ac.uk/id/eprint/33416
PURE UUID: 703957f1-9912-4c59-9518-e86ed1b25d76
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Date deposited: 16 May 2006
Last modified: 15 Mar 2024 07:44
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Author:
Giovanni Pica
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