The Imprudence of Labour Market Flexibilization in a Fiscally Austere World
AbstractThis paper assesses the effects of combining fiscal austerity with flexibilization policies aimed at reducing labour costs and increasing competitiveness. Core to our analysis is a global perspective where the aggregation problem is fully taken into account. We derive a stylized macroeconomic framework of distributive and demand dynamics. We show that even in export-led regimes, after considering global feedbacks, flexibilization policies do not lead to higher income and employment. Rather, the end result is contractionary. Over time, the world economy is essentially wage-led and responds positively to coordinated Keynesian stimuli. Length: 22 pages
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 United Nations, Department of Economics and Social Affairs in its series Working Papers with number 112.
Date of creation: Apr 2012
Date of revision:
labour market flexibilization; fiscal austerity; international coordination; demand; distribution; Keynesian macroeconomics; aggregation problem; race to the bottom; wage-led; export-led;
Find related papers by JEL classification:
- B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
- E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E25 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statistics
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Predrag Vasic).
If references are entirely missing, you can add them using this form.