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The Positive Economics of Labor Market Rigidities and Investor Protection

  • Rainer Fehn
  • Carsten-Patrick Meier
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    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.

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    File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2001/wp-cesifo-2001-04/cesifo_wp456.pdf
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    Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 456.

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    Date of creation: 2001
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    Handle: RePEc:ces:ceswps:_456
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