The Positive Economics of Labor Market Rigidities and Investor Protection
35 Pages Posted: 23 May 2001
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: Suggested Citation