Do capital market and trade liberalization trigger labor market deregulation?

Hervé Boulhol ()
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Hervé Boulhol: CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique

Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL

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: 2009-04
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Published in Journal of International Economics, 2009, 77 (2), pp.223-233. ⟨10.1016/j.jinteco.2008.12.001⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-03015053

DOI: 10.1016/j.jinteco.2008.12.001

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