The Positive Economics of Labor Market Rigidities and Investor Protection

Rainer Fehn and Carsten-Patrick Meier

No 456, CESifo Working Paper Series from CESifo

Abstract: This paper presents a positive model which shows that institutional setups on capital and labor markets might be intertwined by politicoeconomic forces. Some countries especially in continental Europe exhibit a corporatist politicoeconomic equilibrium with a substantial protection of insiders on both markets. The more important money is in political decision-making, the more divided the workforce is, and the more globalized capital markets are, the more likely is a capitalist politicoeconomic equilibrium with little employment and substantial investor protection. Our prediction of a negative cross-country relationship between labor market rigidities and of competition on capital markets receives considerable empirical support.

Keywords: Labor markets; employment protection; corporatism; corporate governance; shareholder protection; political economy (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_456

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