Do capital market and trade liberalization trigger labor market deregulation?

Cahiers de la Maison des Sciences Economiques from Université Panthéon-Sorbonne (Paris 1)

Abstract: Previous analyses showed that product market deregulation often precedes labor market (LM) reforms. This paper introduces LM imperfections within an economic geography framework, the level of optimal LM regulation being based on each country's social preferences. Due to capital mobility, opening the economy to a country with a deregulated LM puts pressure on LM institutions. As the fall in trade costs increases the intensity of the agglomeration force, LM regulation loses in efficiency. The threat of relocation drives changes in LM policy, with suggests that the effect of liberalization might be found primarily in the weakening of employment protection, resulting in minimal actual relocations

Keywords: Deregulation; wage bargaining; capital mobility; agglomeration; relocations (search for similar items in EconPapers)
JEL-codes: F12 F16 F20 J41 J42 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2006-09
New Economics Papers: this item is included in nep-int and nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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https://halshs.archives-ouvertes.fr/halshs-00118951 (application/pdf)
https://doi.org/10.1016/j.jinteco.2008.12.001

Related works:
Journal Article: Do capital market and trade liberalization trigger labor market deregulation? (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:wpsorb:bla06062

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