Do capital market and trade liberalization trigger labor market deregulation?

Herve Boulhol

Journal of International Economics, 2009, vol. 77, issue 2, 223-233

Abstract: Over the past decades, product market deregulation has typically preceded labor market reforms in OECD countries. This paper incorporates labor market rigidities in a model of footloose capital in order to study how globalization might affect the trade-offs generated by labor market regulation and put pressure on labor market institutions. In this two-sector model, globalization ultimately reduces labor market rigidities through either one of two channels: capital mobility triggers a re-allocation of resources, which trade integration amplifies, away from the high-rent / highly-unionized sector; the threat of costly relocations encourages labor market deregulation. The latter channel is more efficient because it avoids sub-optimal sectoral specialization.

Keywords: Deregulation; Wage; bargaining; Capital; mobility; Agglomeration; Relocations (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (47)

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Working Paper: Do capital market and trade liberalization trigger labor market deregulation? (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:77:y:2009:i:2:p:223-233

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