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Lobbying by Capital and Labor over Trade and Labor Market Policies

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Listed:
  • Martín Rama
  • Guido Tabellini

Abstract

This paper uses the common agency approach to analyze the joint determination of product and labor market distortions in a small open economy. Capital owners and union members lobby the government on both tariffs and minimum wages, while other factors of production are not organized. The paper shows that product and labor market distortions always move in the same direction, and that their level is not modified by social pacts between capital and labor. It also shows that labor market distortions are second best. Hence, conditionality by foreign organizations should target distortions in product markets but not in labor markets.

Suggested Citation

  • Martín Rama & Guido Tabellini, "undated". "Lobbying by Capital and Labor over Trade and Labor Market Policies," Working Papers 94, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    • Handle: RePEc:igi:igierp:94
    as

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    References listed on IDEAS

    as
    1. Rama, Martin & Tabellini, Guido, 1995. "Endogenous distortions in product and labor markets," Policy Research Working Paper Series 1413, The World Bank.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    4. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-193.
    5. Bernheim, B Douglas & Whinston, Michael D, 1986. "Common Agency," Econometrica, Econometric Society, vol. 54(4), pages 923-942, July.
    6. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, March.
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