IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_456.html
   My bibliography  Save this paper

The Positive Economics of Labor Market Rigidities and Investor Protection

Author

Listed:
  • Rainer Fehn
  • Carsten-Patrick Meier

Abstract

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.

Suggested Citation

  • Rainer Fehn & Carsten-Patrick Meier, 2001. "The Positive Economics of Labor Market Rigidities and Investor Protection," CESifo Working Paper Series 456, CESifo.
    • Handle: RePEc:ces:ceswps:_456
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo_wp456.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David T. Coe & Dennis J. Snower, 1997. "Policy Complementarities: The Case for Fundamental Labor Market Reform," IMF Staff Papers, Palgrave Macmillan, vol. 44(1), pages 1-35, March.
    2. Black, Bernard S. & Gilson, Ronald J., 1998. "Venture capital and the structure of capital markets: banks versus stock markets," Journal of Financial Economics, Elsevier, vol. 47(3), pages 243-277, March.
    3. Giuseppe Nicoletti & Stefano Scarpetta & Olivier Boylaud, 2000. "Summary Indicators of Product Market Regulation with an Extension to Employment Protection Legislation," OECD Economics Department Working Papers 226, OECD Publishing.
    4. Caballero, Ricardo J. & Hammour, Mohamad L., 1998. "Jobless growth: appropriability, factor substitution, and unemployment," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 48(1), pages 51-94, June.
    5. Lucian Arye Bebchuk, 1999. "A Rent-Protection Theory of Corporate Ownership and Control," NBER Working Papers 7203, National Bureau of Economic Research, Inc.
    6. Siebert, Horst, 1997. "Labor market rigidities and unemployment in Europe," Kiel Working Papers 787, Kiel Institute for the World Economy (IfW Kiel).
    7. 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.
    8. Carlin, Wendy & Mayer, Colin, 2003. "Finance, investment, and growth," Journal of Financial Economics, Elsevier, vol. 69(1), pages 191-226, July.
    9. Assar Lindbeck, 1996. "The West European employment problem," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 132(4), pages 609-637, December.
    10. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    11. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    12. Rafael La Porta & Florencio Lopez‐De‐Silanes & Andrei Shleifer & Robert Vishny, 2002. "Investor Protection and Corporate Valuation," Journal of Finance, American Finance Association, vol. 57(3), pages 1147-1170, June.
    13. Saint-Paul, Gilles, 1998. "A framework for analyzing the political support for active labor market policy," Journal of Public Economics, Elsevier, vol. 67(2), pages 151-165, February.
    14. Calmfors, Lars & Skedinger, Per, 1995. "Does Active Labour-Market Policy Increase Employment? Theoretical Considerations and Some Empirical Evidence from Sweden," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 11(1), pages 91-109, Spring.
    15. Gilles Saint Paul, 1998. "The political consequences of unemployment," Economics Working Papers 343, Department of Economics and Business, Universitat Pompeu Fabra.
    16. Schertler, Andrea & Stolpe, Michael, 2000. "Venture mania in Europe: Its causes and consequences," Kiel Discussion Papers 358, Kiel Institute for the World Economy (IfW Kiel).
    17. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1998. "Law and Finance," Journal of Political Economy, University of Chicago Press, vol. 106(6), pages 1113-1155, December.
    18. repec:hhs:iuiwop:466 is not listed on IDEAS
    19. Ansgar Belke & Rainer Fehn, "undated". "Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter?," German Working Papers in Law and Economics 2001-default/2001/1-1008, Berkeley Electronic Press.
    20. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc.
    21. 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.
    22. Rainer Fehn, "undated". "Der strukturell bedingte Anstieg der Arbeitslosigkeit in Europa - Ursachen und Lösungsansätze," List Monographien 019, List Gesellschaft e.V..
    23. Rajan, Raghuram G & Zingales, Luigi, 1995. "What Do We Know about Capital Structure? Some Evidence from International Data," Journal of Finance, American Finance Association, vol. 50(5), pages 1421-1460, December.
    24. Horst Siebert, 1997. "Labor Market Rigidities: At the Root of Unemployment in Europe," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 37-54, Summer.
    25. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(2), pages 265-286.
    26. Michael Bruno & Jeffrey D. Sachs, 1985. "Economics of Worldwide Stagflation," NBER Books, National Bureau of Economic Research, Inc, number brun85-1, June.
    27. Newell, A. & Symons, J. S. V., 1987. "Corporatism, laissez-faire and the rise in unemployment," European Economic Review, Elsevier, vol. 31(3), pages 567-601, April.
    28. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," The Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-984.
    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. Edmund S. Phelps & Éloi Laurent, 2005. "La « contre-performance » de l'Europe continentale. Le lien entre institutions, dynamisme et prospérité économique," Revue de l'OFCE, Presses de Sciences-Po, vol. 92(1), pages 9-41.
    2. repec:hal:spmain:info:hdl:2441/1421 is not listed on IDEAS
    3. repec:spo:wpecon:info:hdl:2441/1421 is not listed on IDEAS
    4. repec:spo:wpmain:info:hdl:2441/1421 is not listed on IDEAS
    5. Kanniainen, Vesa & Vesala, Timo, 2005. "Entrepreneurship and labor market institutions," Economic Modelling, Elsevier, vol. 22(5), pages 828-847, September.
    6. repec:hal:wpspec:info:hdl:2441/1421 is not listed on IDEAS

    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. Norbert Berthold & Rainer Fehn, 2003. "Unemployment in Germany: Reasons and Remedies," CESifo Working Paper Series 871, CESifo.
    2. Fehn, Rainer & Meier, Carsten-Patrick, 2000. "The positive economics of corporatism and corporate governance," Kiel Working Papers 982, Kiel Institute for the World Economy (IfW Kiel).
    3. Ansgar Belke & Rainer Fehn, "undated". "Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter?," German Working Papers in Law and Economics 2001-default/2001/1-1008, Berkeley Electronic Press.
    4. Ansgar Belke & Rainer Fehn, "undated". "Institutions and Structural Unemployment: Do Capital-Market Imperfections Matter?," German Working Papers in Law and Economics 2001-default/2001/1-1008, Berkeley Electronic Press.
    5. Fehn, Rainer, 2001. "Korporatismus auf dem Arbeitsmarkt und institutionelle Rahmenbedingungen auf dem Kapitalmarkt: zwei Seiten ein- und derselben Medaille?," Discussion Paper Series 46, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    6. Norbert Berthold & Rainer Fehn, 2002. "Arbeitsmarktpolitik in der Europäischen Währungsunion," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 3(3), pages 317-345, August.
    7. Berthold, Norbert & Fehn, Rainer, 2002. "Struktureller Wandel, new economy und Beschäftigungsentwicklung: welche Rolle spielen die institutionellen Rahmenbedingungen auf dem Kapitalmarkt?," Discussion Paper Series 53, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    8. Berthold, Norbert & Fehn, Rainer, 2000. "Arbeitsmarktpolitik in der Europäischen Währungsunion," Discussion Paper Series 38, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    9. Ansgar Belke & Rainer Fehn & Neil Foster, 2003. "Does Venture Capital Investment Spur Employment Growth?," Vienna Economics Papers vie0303, University of Vienna, Department of Economics.
    10. Ansgar Belke & Rainer Fehn & Neil Foster, 2003. "Does Venture Capital Investment Spur Employment Growth?," CESifo Working Paper Series 930, CESifo.
    11. Donatella Gatti & Christophe Rault & Anne-Gael Vaubourg, 2012. "Unemployment and finance: how do financial and labour market factors interact?," Oxford Economic Papers, Oxford University Press, vol. 64(3), pages 464-489, July.
    12. Ansgar Belke & Rainer Fehn & Neil Foster, 2001. "Venture Capital Investment and Labor Market Performance: A Panel Data Analysis," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 197/2001, Department of Economics, University of Hohenheim, Germany.
    13. Fehn, Rainer, 2002. "Arbeitsmarktflexibilisierung und Arbeitslosigkeit," Discussion Paper Series 54, Julius Maximilian University of Würzburg, Chair of Economic Order and Social Policy.
    14. Ansgar Belke & Rainer Fehn & Neil Foster, 2001. "Venture Capital Investment and Labor Market Performance: A Panel Data Analysis," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim 197/2001, Department of Economics, University of Hohenheim, Germany.
    15. Andrea Bassanini & Romain Duval, 2006. "The Determinants of Unemployment across OECD Countries," Post-Print halshs-00120584, HAL.
    16. Groh, Alexander Peter & von Liechtenstein, Heinrich, 2009. "How attractive is central Eastern Europe for risk capital investors?," Journal of International Money and Finance, Elsevier, vol. 28(4), pages 625-647, June.
    17. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 2000. "Investor protection and corporate governance," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 3-27.
    18. Paloma Lopez-Garcia, 2002. "Labour Market Performance and Start-Up Costs: OECD Evidence," CEP Discussion Papers dp0565, Centre for Economic Performance, LSE.
    19. Bencheikh, Fayrouz & Taktak, Neila Boulila, 2017. "Access to bank financing and the collateral channel: The case of Tunisian firms before and after the revolution," Research in International Business and Finance, Elsevier, vol. 42(C), pages 874-886.
    20. Groh, Alexander P., 2009. "Private equity in emerging markets," IESE Research Papers D/779, IESE Business School.

    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:ces:ceswps:_456. See general information about how to correct material in RePEc.

    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: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.