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The Positive Economics of Labor Market Rigidities and Investor Protection

Author

Listed:
  • Rainer Fehn
  • Carsten-Patrick Meier

Abstract

This paper presents a positive model which shows that institutional setups on capital and labor markets might be intertwined by politicoeconomic forces. Some countries especially in continental Europe exhibit a corporatist politicoeconomic equilibrium with a substantial protection of insiders on both markets. The more important money is in political decision-making, the more divided the workforce is, and the more globalized capital markets are, the more likely is a capitalist politicoeconomic equilibrium with little employment and substantial investor protection. Our prediction of a negative cross-country relationship between labor market rigidities and of competition on capital markets receives considerable empirical support.

Suggested Citation

  • Rainer Fehn & Carsten-Patrick Meier, 2001. "The Positive Economics of Labor Market Rigidities and Investor Protection," CESifo Working Paper Series 456, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_456
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    File URL: http://www.cesifo-group.de/DocDL/cesifo_wp456.pdf
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    References listed on IDEAS

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    Cited by:

    1. Kanniainen, Vesa & Vesala, Timo, 2005. "Entrepreneurship and labor market institutions," Economic Modelling, Elsevier, vol. 22(5), pages 828-847, September.

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