Reforms, Finance, and Current Accounts

Giuseppe Bertola and Anna Lo Prete

No 5206, CESifo Working Paper Series from CESifo

Abstract: We analyze the implications of labor market reforms for an open economy’s human capital investment and future production. A stylized model shows that labor market deregulation can imply more positive current account balances if financial markets are imperfect and labor market institutions not only distort labor allocation, but also smooth income. Empirically, in OECD country-level panel data, we find that labor market deregulation has been positively related to current account surpluses on average and more strongly so when and where financial market access was more limited. These results are robust to inclusion of standard determinants of current account imbalances, and do not appear to be driven by cyclical phenomena.

Keywords: labor market deregulation; precautionary savings (search for similar items in EconPapers)
JEL-codes: F40 J68 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Reforms, Finance, and Current Accounts (2015)
Working Paper: Reforms, Finance, and Current Accounts (2015)
Working Paper: Reforms, Finance, and Current Accounts (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_5206

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