Capital Markets Integration and Labor Market Institutions

Giovanni Pica

CSEF Working Papers from Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy

Abstract: A major development in recent decades in industrialised countries is the decline in national savings rates. Over the same period, the labour’s share of national income has also declined in many industrialised countries. This paper seeks to provide a unified account of these developments. We show that globalization, in the form of increased capital mobility, provides incentives to implement labour market reforms that raise the returns to capital and improve efficiency. Nevertheless, in a world where aggregate savings reflect life-cycle motives and are mainly performed out of labour income, the associated fall in the labour share reduces aggregate savings and the pace of capital accumulation. This inefficient outcome is due to competition for capital between countries generating negative externalities.

Keywords: Unemployment; Factor mobility; Political economy; Globalization (search for similar items in EconPapers)
JEL-codes: E24 F20 F4 (search for similar items in EconPapers)
Date: 2005-10-01, Revised 2007-11-01
New Economics Papers: this item is included in nep-lab and nep-mac
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http://www.csef.it/WP/wp144.pdf (application/pdf)

Related works:
Journal Article: Capital Markets Integration and Labor Market Institutions (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:sef:csefwp:144

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