The Positive Economics of Labor Market Rigidities and Investor Protection

35 Pages Posted: 23 May 2001

See all articles by Rainer Fehn

Rainer Fehn

CESifo (Center for Economic Studies and Ifo Institute)

Carsten-Patrick Meier

University of Kiel - Institute for World Economics (IfW)

Date Written: April 2001

Abstract

This paper presents a positive model which shows that institutional setups on capital and labor markets might be intertwined by politicoeconomic forces. Some countries especially in continental Europe exhibit a corporatist politicoeconomic equilibrium with a substantial protection of insiders on both markets. The more important money is in political decision-making, the more divided the workforce is, and the more globalized capital markets are, the more likely is a capitalist politicoeconomic equilibrium with little employment and substantial investor protection. Our prediction of a negative cross-country relationship between labor market rigidities and of competition on capital markets receives considerable empirical support.

Keywords: Labor Markets, Employment Protection, Corporatism, Corporate Governance, Shareholder Protection, Political Economy

JEL Classification: G34, K22, K42

Suggested Citation

Fehn, Rainer and Meier, Carsten-Patrick, The Positive Economics of Labor Market Rigidities and Investor Protection (April 2001). Available at SSRN: https://ssrn.com/abstract=270183 or http://dx.doi.org/10.2139/ssrn.270183

Rainer Fehn (Contact Author)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Carsten-Patrick Meier

University of Kiel - Institute for World Economics (IfW) ( email )

D-24100 Kiel
Germany

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