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Labor Market Institutions, International Capital Mobility, and the Persistence of Underdevelopment

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  • Graziella Bertocchi

    (Universita di Modena)

Abstract

We show that the impact of globalization on growth and wages crucially depends on the labor market structures of the countries involved. We contrast bargaining and perfect competition. Under perfect capital markets, convergence of capital and income per capita always occurs despite different labor market structures. However, different labor market structures prevent convergence of the income shares, with unionized countries showing a lower wage rate and consequent capital inflows. Therefore unionization, not globalization, is the cause of discrepancies in the within-country income-distribution patterns. Openness is always preferable to autarky for a small developing economy, independently of its labor market structure. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(03)00007-3
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 3 (July)
Pages: 637-650

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Handle: RePEc:red:issued:v:6:y:2003:i:3:p:637-650

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Keywords: wage bargaining; globalization; convergence; underdevelopment;

References

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Citations

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Cited by:
  1. Marta Aloi & Teresa Lloyd-Braga, 2010. "National labor markets, international factor mobility and macroeconomic instability," Economic Theory, Springer, vol. 43(3), pages 431-456, June.
  2. Lo Prete, Anna, 2013. "Sharing risk within and across countries: the role of labor market institutions," Economic Systems, Elsevier, vol. 37(3), pages 449-461.
  3. Giovanni Pica, 2005. "Capital Markets Integration and Labor Market Institutions," CSEF Working Papers 144, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Nov 2007.
  4. Virén , Matti, 2005. "Why do capital intensive companies pay higher wages?," Research Discussion Papers 5/2005, Bank of Finland.
  5. Erkki Koskela & Mikko Puhakka, 2006. "Stability and Dynamics in an Overlapping Generations Economy under Flexible Wage Negotiation and Capital Accumulation," CESifo Working Paper Series 1840, CESifo Group Munich.
  6. Matti Viren, 2006. "Higher wages and capital intensity: a closer look," Discussion Papers 13, Aboa Centre for Economics.
  7. Matti Virén, 2005. "Why do capital intensive companies pay higher wages?," Labor and Demography 0508014, EconWPA.

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