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The Positive Economics of Labor Market Rigidities and Investor Protection

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  • Rainer Fehn
  • Carsten-Patrick Meier

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.

Suggested Citation

  • Rainer Fehn & Carsten-Patrick Meier, 2001. "The Positive Economics of Labor Market Rigidities and Investor Protection," CESifo Working Paper Series 456, CESifo.
    • Handle: RePEc:ces:ceswps:_456
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    Cited by:

    1. Edmund S. Phelps & Éloi Laurent, 2005. "La « contre-performance » de l'Europe continentale. Le lien entre institutions, dynamisme et prospérité économique," Revue de l'OFCE, Presses de Sciences-Po, vol. 92(1), pages 9-41.
    2. repec:hal:spmain:info:hdl:2441/1421 is not listed on IDEAS
    3. repec:spo:wpecon:info:hdl:2441/1421 is not listed on IDEAS
    4. Kanniainen, Vesa & Vesala, Timo, 2005. "Entrepreneurship and labor market institutions," Economic Modelling, Elsevier, vol. 22(5), pages 828-847, September.
    5. repec:hal:wpspec:info:hdl:2441/1421 is not listed on IDEAS

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