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Do capital market and trade liberalization trigger labor market deregulation?

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  • Hervé Boulhol

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

Abstract

Previous analyses showed that product market deregulation often precedes labor market (LM) reforms. This paper introduces LM imperfections within an economic geography framework, the level of optimal LM regulation being based on each country's social preferences. Due to capital mobility, opening the economy to a country with a deregulated LM puts pressure on LM institutions. As the fall in trade costs increases the intensity of the agglomeration force, LM regulation loses in efficiency. The threat of relocation drives changes in LM policy, with suggests that the effect of liberalization might be found primarily in the weakening of employment protection, resulting in minimal actual relocations.

Suggested Citation

  • Hervé Boulhol, 2006. "Do capital market and trade liberalization trigger labor market deregulation?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00118951, HAL.
    • Handle: RePEc:hal:cesptp:halshs-00118951
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00118951
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    Cited by:

    1. Hervé Boulhol & Sabien Dobbelaere & Sara Maioli, 2011. "Imports as Product and Labour Market Discipline," British Journal of Industrial Relations, London School of Economics, vol. 49(2), pages 331-361, June.

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