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The political economy of job protection and income redistribution

  • Bruno Amable

    ()

    (CEPREMAP - Centre pour la recherche économique et ses applications - Centre pour la recherche économique et ses applications, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris, UP10 - Université Paris 10, Paris Ouest Nanterre La Défense - Université Paris X - Paris Ouest Nanterre La Défense)

  • Donatella Gatti

    (CEPREMAP - Centre pour la recherche économique et ses applications - Centre pour la recherche économique et ses applications, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - École des Hautes Études en Sciences Sociales (EHESS) - École des Ponts ParisTech (ENPC) - École normale supérieure [ENS] - Paris, IZA - Institute for the Study of Labor, UNIV LYON 2 - Université Lumière - Lyon 2 - Université Lumière - Lyon II)

This paper presents a model allowing to analyze voting, welfare institutions and economic performance. We consider a political economy framework with three classes of agents: entrepreneurs, employed workers and unemployed workers. Agents vote on alternative institutional options: the degree of labour market flexibility and the intensity of redistribution. We show that the welfare state configuration depends on the nature of the political system - majoritarian, coalition, twoparty. Because internationalization reduces the possibility for national government to e.ectively tax profits, the existing political coalition is fragilized by the process of globalization. The model generates results concerning the macroeconomic equilibrium employment level. Hence we can assess the effects of internationalization on macroeconomic performance. The impact of internalization depends on the nature of the political system (majoritarian versus coalition government) and on the institutional configuration (positive flexibility versus positive redistribution).

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Paper provided by HAL in its series PSE Working Papers with number halshs-00590841.

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Date of creation: Jan 2005
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Handle: RePEc:hal:psewpa:halshs-00590841
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