IDEAS home Printed from https://ideas.repec.org/p/wpa/wuwpla/0112002.html
   My bibliography  Save this paper

Economic Integration and Labor Market Institutions: Worker Mobility, Earnings Risk, and Contract Structure

Author

Listed:
  • Ronnie Schoeb

    (University of Munich)

  • David E. Wildasin

    (University of Kentucky)

Abstract

This paper investigates the effects of labor market integration, in the form of worker mobility, in a model with long-term labor contracts that lead to wage rigidities and unemployment. Increased mobility leads to more flexible labor market institutions in which firms can more easily vary the level of employment in response to fluctuations in demand. Economic integration is potentially Pareto-improving but, in the absence of a system of compensation, workers are harmed by greater labor mobility while the owners of firms benefit from higher profits.

Suggested Citation

  • Ronnie Schoeb & David E. Wildasin, 2001. "Economic Integration and Labor Market Institutions: Worker Mobility, Earnings Risk, and Contract Structure," Labor and Demography 0112002, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpla:0112002
    Note: Type of Document - ; prepared on TeX; figures: request from author
    as

    Download full text from publisher

    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/lab/papers/0112/0112002.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stephen Nickell, 2003. "Labour Market Institutions and Unemployment in OECD Countries," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 1(2), pages 13-26, October.
    2. Grossman, Sanford J & Hart, Oliver D, 1981. "Implicit Contracts, Moral Hazard, and Unemployment," American Economic Review, American Economic Association, vol. 71(2), pages 301-307, May.
    3. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    4. Wildasin, David E, 1995. " Factor Mobility, Risk and Redistribution in the Welfare State," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(4), pages 527-546, December.
    5. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084, Elsevier.
    6. Gilles Saint-Paul, 1996. "Labor market institutions and the cohesion of the middle class," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 3(3), pages 385-395, July.
    7. Shin, Kwanho, 1997. "Inter- and Intrasectoral Shocks: Effects on the Unemployment Rate," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 376-401, April.
    8. Baily, Martin Neil, 1977. "On the Theory of Layoffs and Unemployment," Econometrica, Econometric Society, vol. 45(5), pages 1043-1063, July.
    9. Decressin, Jorg & Fatas, Antonio, 1995. "Regional labor market dynamics in Europe," European Economic Review, Elsevier, vol. 39(9), pages 1627-1655, December.
    10. Agell, Jonas & Lommerud, Kjell Erik, 1992. "Union Egalitarianism as Income Insurance," Economica, London School of Economics and Political Science, vol. 59(235), pages 295-310, August.
    11. Saint-Paul, Gilles, 1997. "The Rise and Persistence of Rigidities," American Economic Review, American Economic Association, vol. 87(2), pages 290-294, May.
    12. Paul Beaudry & John DiNardo, 1995. "Is the Behavior of Hours Worked Consistent with Implicit Contract Theory?," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 743-768.
    13. Topel, Robert H, 1991. "Specific Capital, Mobility, and Wages: Wages Rise with Job Seniority," Journal of Political Economy, University of Chicago Press, vol. 99(1), pages 145-176, February.
    14. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-688, August.
    15. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    16. Dani Rodrik, 1998. "Why Do More Open Economies Have Bigger Governments?," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 997-1032, October.
    17. Rosen, Sherwin, 1985. "Implicit Contracts: A Survey," Journal of Economic Literature, American Economic Association, vol. 23(3), pages 1144-1175, September.
    18. Bertola, Giuseppe, 1999. "Microeconomic perspectives on aggregate labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 45, pages 2985-3028, Elsevier.
    19. Taylor, Mark P, 1987. "The Simple Analytics of Implicit Labour Contracts," Bulletin of Economic Research, Wiley Blackwell, vol. 39(1), pages 1-27, January.
    20. Leslie, Derek, 1992. "Insider-Outsider Theory and the Case for Implicit Contracts," Economic Journal, Royal Economic Society, vol. 102(410), pages 37-48, January.
    21. Ethier, Wilfred J, 1985. "International Trade and Labor Migration," American Economic Review, American Economic Association, vol. 75(4), pages 691-707, September.
    22. Gordon, Donald F, 1974. "A Neo-Classical Theory of Keynesian Unemployment," Economic Inquiry, Western Economic Association International, vol. 12(4), pages 431-459, December.
    23. Feldstein, Martin S, 1976. "Temporary Layoffs in the Theory of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 937-957, October.
    24. Oliver D. Hart, 1983. "Optimal Labour Contracts under Asymmetric Information: An Introduction," Review of Economic Studies, Oxford University Press, vol. 50(1), pages 3-35.
    25. Martin Neil Baily, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Oxford University Press, vol. 41(1), pages 37-50.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. David E. Wildasin, 2000. "Factor mobility and fiscal policy in the EU: policy issues and analytical approaches," Economic Policy, CEPR;CES;MSH, vol. 15(31), pages 338-378.
    2. Picard, Pierre M. & Wildasin, David E., 2011. "Outsourcing, labor market pooling, and labor contracts," Journal of Urban Economics, Elsevier, vol. 70(1), pages 47-60, July.
    3. Hans-Werner Sinn, 1999. "Inflation and Welfare: Comment on Robert Lucas," NBER Working Papers 6979, National Bureau of Economic Research, Inc.
    4. Picard, Pierre M. & Wildasin, David, 2009. "Labor Market Pooling, Outsourcing and Labor Contracts," IZA Discussion Papers 4357, Institute of Labor Economics (IZA).
    5. Poutvaara, Panu, 1999. "Federation's alternative tax constitutions and risky education," ZEW Discussion Papers 99-42, ZEW - Leibniz Centre for European Economic Research.
    6. Jonas Agell, 2001. "Warum haben wir rigide Arbeitsmärkte? Rent‐seeking versus Soziale Sicherung," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 2(4), pages 363-381, November.
    7. Agell Jonas, 2002. "On the Determinants of Labour Market Institutions: Rent Seeking vs. Social Insurance," German Economic Review, De Gruyter, vol. 3(2), pages 107-135, May.
    8. He, Weijun & Wang, Bo & Danish, & Wang, Zhaohua, 2018. "Will regional economic integration influence carbon dioxide marginal abatement costs? Evidence from Chinese panel data," Energy Economics, Elsevier, vol. 74(C), pages 263-274.
    9. Lars Calmfors & Giancarlo Corsetti & Michael P. Devereux & Gilles Saint-Paul & Hans-Werner Sinn & Jan-Egbert Sturm & Xavier Vives, 2008. "Chapter 3: The effect of globalisation on Western European jobs: curse or blessing?," EEAG Report on the European Economy, CESifo, vol. 0, pages 71-104, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:eee:labchp:v:3:y:1999:i:pb:p:2291-2372 is not listed on IDEAS
    2. Christian Calmès, 2003. "Poignée de main invisible et persistance des cycles économiques : une revue de la littérature," Staff Working Papers 03-40, Bank of Canada.
    3. Pissarides, Christopher, 2002. "Consumption and savings with unemployment risk: implications for optimal employment contracts," LSE Research Online Documents on Economics 2211, London School of Economics and Political Science, LSE Library.
    4. Christian Calmès & Raymond Théoret, 2009. "The Non-Convexity Issues in a Limited-Commitment Economy," RePAd Working Paper Series UQO-DSA-wp012009, Département des sciences administratives, UQO.
    5. Calmès, Christian, 2003. "La poignée de main invisible et la persistance des cycles d’affaires : un survol," L'Actualité Economique, Société Canadienne de Science Economique, vol. 79(4), pages 563-581, Décembre.
    6. repec:eee:labchp:v:2:y:1986:i:c:p:1001-1035 is not listed on IDEAS
    7. Simon Franklin & Julien Labonne, 2019. "Economic Shocks and Labor Market Flexibility," Journal of Human Resources, University of Wisconsin Press, vol. 54(1), pages 171-199.
    8. Sampson, Anthony A, 1994. "Implicit Contracts, Trade Unions and Involuntary Unemployment," Bulletin of Economic Research, Wiley Blackwell, vol. 46(1), pages 23-39, January.
    9. Cardoso, Ana Rute & Portela, Miguel, 2005. "The Provision of Wage Insurance by the Firm: Evidence from a Longitudinal Matched Employer-Employee Dataset," IZA Discussion Papers 1865, Institute of Labor Economics (IZA).
    10. John C. Ham & Kevin T. Reilly, 2013. "Implicit Contracts, Life Cycle Labor Supply, And Intertemporal Substitution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(4), pages 1133-1158, November.
    11. Pissarides, Christopher A., 2001. "Employment protection," Labour Economics, Elsevier, vol. 8(2), pages 131-159, May.
    12. Ana Rute Cardoso & Miguel Portela, 2009. "Micro Foundations for Wage Flexibility: Wage Insurance at the Firm Level," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 29-50, March.
    13. repec:eee:labchp:v:2:y:1986:i:c:p:789-848 is not listed on IDEAS
    14. Dale T. Mortensen, 1978. "On The Theory of Layoffs," Discussion Papers 322, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    15. Robert H. Topel & Finis Welch, 1986. "Efficient Labor Contracts with Employment Risk," RAND Journal of Economics, The RAND Corporation, vol. 17(4), pages 490-507, Winter.
    16. John C. Ham & Kevin T. Reilly, 2013. "Implicit Contracts, Life Cycle Labor Supply, And Intertemporal Substitution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 1133-1158, November.
    17. N. Guertzgen, 2014. "Wage insurance within German firms: do institutions matter?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 177(2), pages 345-369, February.
    18. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2012. "Contract Form, Wage Flexibility, and Employment," American Economic Review, American Economic Association, vol. 102(3), pages 526-531, May.
    19. Pissarides, Christopher, 2002. "Consumption and Savings with Unemployment Risk: Implications for Employment Contracts," CEPR Discussion Papers 3367, C.E.P.R. Discussion Papers.
    20. Grandmont, Jean-michel, 1989. "Keynesian issues and economic theory," CEPREMAP Working Papers (Couverture Orange) 8907, CEPREMAP.
    21. Robert Dur & Heiner Schmittdiel, 2019. "Paid to Quit," De Economist, Springer, vol. 167(4), pages 387-406, December.
    22. Christian Calmès, 2005. "Self-Enforcing Labour Contracts and the Dynamics Puzzle," Staff Working Papers 05-1, Bank of Canada.
    23. Marcel Chassot, 1982. "Zur Asymmetrie des Lohnverhaltens - Das Beispiel der schweizerischen Phillips-Kurve: 1959-1979," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 118(IV), pages 393-407, December.

    More about this item

    Keywords

    labor mobility economic integration unemployment implicit contracts;

    JEL classification:

    • J - Labor and Demographic Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpla:0112002. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: EconWPA (email available below). General contact details of provider: https://econwpa.ub.uni-muenchen.de .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.