Lobbying by Capital and Labor Over Trade and Labor Market Policies

IGIER Working Paper 94

Posted: 13 Nov 1996

See all articles by Martin Rama

Martin Rama

World Bank

Guido Tabellini

Bocconi University - Department of Economics; Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research; Center for Economic Studies and Ifo Institute for Economic Research (CESifo)

Date Written: May 1996

Abstract

This paper uses the common agency approach to analyze the joint determination of product and labor market distortions in a small open economy. Capital owners and union members lobby the government on both tariffs and minimum wages, while other factors of production are not organized. The paper shows that product and labor market distortions move in the same direction in response to changes in economic and political parameters and that their level is not modified by social pacts between capital and labor. It also shows that labor market distortions are second best. Hence, conditionality by foreign organizations should target distortions in product markets but not in labor markets.

JEL Classification: F10, J00

Suggested Citation

Rama, Martin and Tabellini, Guido, Lobbying by Capital and Labor Over Trade and Labor Market Policies (May 1996). IGIER Working Paper 94. Available at SSRN: https://ssrn.com/abstract=3488

Martin Rama

World Bank ( email )

1818 H. Street, N.W.
Washington, DC 20433
United States

Guido Tabellini (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Bocconi University - IGIER - Innocenzo Gasparini Institute for Economic Research ( email )

Via Roentgen 1
Milan, 20136
Italy

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

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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