The Imprudence of Labour Market Flexibilization in a Fiscally Austere World

Alex Izurieta

Working Papers from United Nations, Department of Economics and Social Affairs

Abstract: This paper assesses the effects of combining fiscal austerity with flexibilization policies aimed at reducing labour costs and increasing competitiveness. Core to our analysis is a global perspective where the aggregation problem is fully taken into account. We derive a stylized macroeconomic framework of distributive and demand dynamics. We show that even in export-led regimes, after considering global feedbacks, flexibilization policies do not lead to higher income and employment. Rather, the end result is contractionary. Over time, the world economy is essentially wage-led and responds positively to coordinated Keynesian stimuli. Length: 22 pages

Keywords: labour market flexibilization; fiscal austerity; international coordination; demand; distribution; Keynesian macroeconomics; aggregation problem; race to the bottom; wage-led; export-led (search for similar items in EconPapers)
JEL-codes: B50 E12 E24 E25 E62 F16 F41 F42 O33 O52 (search for similar items in EconPapers)
Date: 2012-04
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:une:wpaper:112

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