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The Political Economy of Job Protection and Income Redistribution

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Author Info
Amable, Bruno (University of Paris X, Nanterre and CEPREMAP)
Gatti, Donatella () (University Lumière Lyon 2, CEPREMAP and IZA Bonn)

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Abstract

This paper presents a model allowing to analyze voting, welfare institutions and economic performance. We consider a political economy framework with three classes of agents: entrepreneurs, employed workers and unemployed workers. Agents vote on alternative institutional options: the degree of labour market flexibility and the intensity of redistribution. We show that the welfare state configuration depends on the nature of the political system – majoritarian, coalition, two-party. Because internationalization reduces the possibility for national government to effectively tax profits, the existing political coalition is fragilized by the process of globalization. The model generates results concerning the macroeconomic equilibrium employment level. Hence we can assess the effects of internationalization on macroeconomic performance. The impact of internalization depends on the nature of the political system (majoritarian versus coalition government) and on the institutional configuration (positive flexibility versus positive redistribution).

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1404.

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Length: 26 pages
Date of creation: Nov 2004
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Handle: RePEc:iza:izadps:dp1404

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Related research
Keywords: job security redistribution political equilibriums unemployment

Other versions of this item:

Find related papers by JEL classification:
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings

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References listed on IDEAS
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.:
  1. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems And Public Spending," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 609-657, May. [Downloadable!] (restricted)
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  2. Boeri, Tito & Nicoletti, Giuseppe & Scarpetta, Stefano, 2000. "Regulation And Labour Market Performance," CEPR Discussion Papers 2420, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Bruno Amable & Donatella Gatti, 2004. "Product market competition, job security, and aggregate employment," Oxford Economic Papers, Oxford University Press, vol. 56(4), pages 667-686, October. [Downloadable!] (restricted)
  4. Persson, Torsten & Tabellini, Guido, 1997. "Political Economics and Macroeconomic Policy," CEPR Discussion Papers 1759, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  5. Torben M. Andersen, 2003. "European integration and the welfare state," Journal of Population Economics, Springer, vol. 16(1), pages 1-19, 02. [Downloadable!] (restricted)
  6. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June. [Downloadable!] (restricted)
  7. Alesina, Alberto & Wacziarg, Romain, 1998. "Openness, country size and government," Journal of Public Economics, Elsevier, vol. 69(3), pages 305-321, September. [Downloadable!] (restricted)
  8. Eric J. Bartelsman & Roel M.W.J. Beetsma, 2000. "Why pay more? Corporate Tax Avoidance through Transfer Pricing in OECD Countries," Tinbergen Institute Discussion Papers 00-054/2, Tinbergen Institute. [Downloadable!]
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  9. Persson, Torsten & Tabellini, Guido, 1998. "The size and scope of government: Comparative politics with rational politicians," Seminar Papers 658, Stockholm University, Institute for International Economic Studies. [Downloadable!]
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  10. Bruno Amable & Donatella Gatti & Jan Schumacher, 2006. "Welfare state retrenchment: The partisan effect revisited," PSE Working Papers 2006-07, PSE (Ecole normale supérieure). [Downloadable!]
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  11. Torsten Persson & Gerard Roland & Guido Tabellini, 2003. "How Do Electoral Rules Shape Party Structures, Government Coalitions, and Economic Policies?," NBER Working Papers 10176, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Torsten Persson, 2002. "Do Political Institutions Shape Economic Policy?," Econometrica, Econometric Society, vol. 70(3), pages 883-905, May. [Downloadable!] (restricted)
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  13. Pagano, Marco & Volpin, Paolo, 2001. "The Political Economy of Corporate Governance," CEPR Discussion Papers 2682, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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Cited by:
(explanations, 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.)

  1. Bruno Amable & Donatella Gatti & Jan Schumacher, 2006. "Welfare state retrenchment: The partisan effect revisited," PSE Working Papers 2006-07, PSE (Ecole normale supérieure). [Downloadable!]
    Other versions:
  2. Gatti, Donatella, 2008. "Macroeconomic Effects of Ownership Structure in OECD Countries," IZA Discussion Papers 3415, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  3. John T. Addison, 2006. "Politico-Economic Causes of Labor Regulation in the United States: Rent Seeking, Alliances, Raising Rivals’ Costs (Even Lowering One’s Own?), and Interjurisdictional Competition," IZA Discussion Papers 2381, Institute for the Study of Labor (IZA). [Downloadable!]
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This page was last updated on 2008-10-6.

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