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Globalization and Labour Markets Deregulation

  • Teodora Dimitrova

    ()

    (Department of Economics, University of Konstanz)

  • Anton Tchipev

    ()

    (Department of Economics, University of Konstanz)

We present a model consistent with the stylized fact that "rigid Europe" has witnessed higher unemployment and a more compressed wage structure than "flexible America". A distinguishing feature of the present paper is that it endogenises the labour market regulations that account for this divergent experience. We use our political economy model to investigate the policy responses to globalization, i.e. to an increase in international capital mobility. It turns out that labour market institutions are not necessarily scaled down in the course of globalization; rather, the direction of the globalization-induced policy response is determined by the relative strength of the politically active groups.

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Paper provided by Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim in its series Working Papers of the Research Group Heterogenous Labor with number 04-08.

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Length: 44 pages
Date of creation: 08 Mar 2004
Date of revision:
Handle: RePEc:knz:hetero:0408
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