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Economic integration and labor market institutions: Worker mobility, earnings risk, and contract structure


  • Schob, Ronnie
  • Wildasin, David E.


This paper investigates the effects of labor market integration, in the form of worker mobililty, in a model with long-term labor contracts that lead to wage rigidities and unemployment. Increased mobility leads to more flexible labor market institutions in which firms can more easily vary the level of employment in response to fluctuations in demand. Economic integration is potentially Pareto-improving but, in the absence a system of compensation, workers are harmed by greater labor mobility while the owners of firms benefit from higher profits.
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Suggested Citation

  • Schob, Ronnie & Wildasin, David E., 2007. "Economic integration and labor market institutions: Worker mobility, earnings risk, and contract structure," Regional Science and Urban Economics, Elsevier, vol. 37(2), pages 141-164, March.
  • Handle: RePEc:eee:regeco:v:37:y:2007:i:2:p:141-164

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    References listed on IDEAS

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    Cited by:

    1. Jonas Agell, 2002. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," German Economic Review, Verein für Socialpolitik, vol. 3(2), pages 107-135, May.
    2. Picard, Pierre M. & Wildasin, David E., 2011. "Outsourcing, labor market pooling, and labor contracts," Journal of Urban Economics, Elsevier, vol. 70(1), pages 47-60, July.
    3. Hans-Werner Sinn, 1999. "Inflation and Welfare: Comment on Robert Lucas," NBER Working Papers 6979, National Bureau of Economic Research, Inc.
    4. David E. Wildasin, 2000. "Factor mobility and fiscal policy in the EU: policy issues and analytical approaches," Economic Policy, CEPR;CES;MSH, vol. 15(31), pages 337-378, October.
    5. Poutvaara, Panu, 1999. "Federation's alternative tax constitutions and risky education," ZEW Discussion Papers 99-42, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Jonas Agell, 2001. "Warum haben wir rigide Arbeitsmärkte? Rent-seeking versus Soziale Sicherung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 2(4), pages 363-381, November.
    7. Lars Calmfors & Giancarlo Corsetti & Michael P. Devereux & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2008. "Chapter 3: The effect of globalisation on Western European jobs: curse or blessing?," EEAG Report on the European Economy, CESifo Group Munich, vol. 0, pages 71-104, February.

    More about this item

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • J1 - Labor and Demographic Economics - - Demographic Economics
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers


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