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Capital Markets Integration and Labor Market Institutions

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Author Info
Giovanni Pica () (University of Salerno and CSEF)

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Abstract

A major development in recent decades in industrialised countries is the decline in national savings rates. Over the same period, the labour’s share of national income has also declined in many industrialised countries. This paper seeks to provide a unified account of these developments. We show that globalization, in the form of increased capital mobility, provides incentives to implement labour market reforms that raise the returns to capital and improve efficiency. Nevertheless, in a world where aggregate savings reflect life-cycle motives and are mainly performed out of labour income, the associated fall in the labour share reduces aggregate savings and the pace of capital accumulation. This inefficient outcome is due to competition for capital between countries generating negative externalities.

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Publisher Info
Paper provided by Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number 144.

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Date of creation: 01 Oct 2005
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Handle: RePEc:sef:csefwp:144

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Related research
Keywords: Unemployment; Factor mobility; Political economy; Globalization;

Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
F20 - International Economics - - International Factor Movements and International Business - - - General
F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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