The Political Economy of Occupational Mobility and Redistribution Policy

Ryo Arawatari () and Tetsuo Ono

No 08-18, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP)

Abstract: In this study, we ask why countries with similar labor market characteristics experience different occupational mobility levels and redistribution policies. We develop a politico-economic model that integrates occupational mobility affected by individual educational investments with voting on redistribution policies. It is shown that a rigid labor market will tend to produce multiple equilibria: a poor-majority equilibrium with lower mobility and higher redistribution and a rich-majority equilibrium with higher mobility and lower redistribution. However, a flexible labor market will tend to produce a unique, poor-majority equilibrium with high mobility and low redistribution, which supports the POUM (prospect of upward mobility) hypothesis. Deregulation in the labor market enhances mobility but may degrade social welfare.

Keywords: Occupational mobility; Political economy; Stationary Markov perfect equilibrium; Redistribution (search for similar items in EconPapers)
JEL-codes: D72 H55 I38 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-lab and nep-pol
Date: 2008-04
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