Economic Integration and Labor Market Institutions: Worker Mobility, Earnings Risk, and Contract Structure

38 Pages Posted: 12 Dec 2003

See all articles by Ronnie Schöb

Ronnie Schöb

Freie Universitaet Berlin; CESifo (Center for Economic Studies and Ifo Institute)

David E. Wildasin

University of Kentucky; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA); University of Oxford - Oxford University Centre for Business Taxation

Date Written: December 2003

Abstract

This paper investigates the effects of labor market integration, in the form of worker mobility, in a model with long-term labor contracts that lead to wage rigidities and unemployment. Increased mobility leads to more flexible labor market institutions in which firms can more easily vary the level of employment in response to fluctuations in demand. Economic integration is potentially Pareto-improving but, in the absence of a system of compensation, workers are harmed by greater labor mobility while the owners of firms benefit from higher profits.

Keywords: migration, unemployment, labor market integration, risk

JEL Classification: R0, J1, J6

Suggested Citation

Schöb, Ronnie and Wildasin, David E., Economic Integration and Labor Market Institutions: Worker Mobility, Earnings Risk, and Contract Structure (December 2003). IZA Discussion Paper No. 945. Available at SSRN: https://ssrn.com/abstract=148456

Ronnie Schöb (Contact Author)

Freie Universitaet Berlin ( email )

Boltzmannstraße 20
Berlin, Berlin 14195
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

David E. Wildasin

University of Kentucky ( email )

Department of Economics
Lexington, KY 40546
United States

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

University of Oxford - Oxford University Centre for Business Taxation ( email )

Saïd Business School
Park End Street
Oxford, OX1 1HP
United Kingdom

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