On the Political Economy of Labour Market Flexibility
AbstractThis paper starts from the observation that despite their very high levels of unemployment, major European countries have devoted few resources to reducing it. This suggests that there is little political concern about high unemployment. I develop a model where the government tries to increase employment by increasing labour market flexibility, and where any reform must pass majority voting. It is shown that the employed will block a complete reform of the labour market. A two-tier system will eventually generate consensus over the reform, however. In the long run, when the two-tier system prevails, political support gradually builds up in favour of further increases in flexibility. This creates a time-consistency problem, however, putting bounds on the reform that can be implemented ex ante . The model may generate complementarities between the economic system and the political system and lead to multiple equilibria. I also review various pieces of evidence, which lend support to the hypotheses brought up in the paper.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 803.
Date of creation: Aug 1993
Date of revision:
Contact details of provider:
Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
Other versions of this item:
- Gilles Saint-Paul, 1993. "On the Political Economy of Labor Market Flexibility," NBER Chapters, in: NBER Macroeconomics Annual 1993, Volume 8, pages 151-196 National Bureau of Economic Research, Inc.
- Saint-Paul, G., 1993. "On the Political Economy of Labor Market Flexibility," DELTA Working Papers 93-02, DELTA (Ecole normale supérieure).
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rebitzer, James B & Taylor, Lowell J, 1991. "A Model of Dual Labor Markets When Product Demand Is Uncertain," The Quarterly Journal of Economics, MIT Press, vol. 106(4), pages 1373-83, November.
- Alesina, Alberto, 1987. "Macroeconomic Policy in a Two-party System as a Repeated Game," Scholarly Articles 4552531, Harvard University Department of Economics.
- C Bean, 1992.
"European Unemployment: A Survey,"
CEP Discussion Papers
dp0071, Centre for Economic Performance, LSE.
- Saint-Paul, Gilles, 1991. "Dynamic labor demand with dual labor markets," Economics Letters, Elsevier, vol. 36(2), pages 219-222, June.
- Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
- Dewatripont, M & Roland, G, 1992. "Economic Reform and Dynamic Political Constraints," Review of Economic Studies, Wiley Blackwell, vol. 59(4), pages 703-30, October.
- Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
If references are entirely missing, you can add them using this form.