DP10088 Labor policies and capital mobility in theory and in EMU

Author(s): Giuseppe Bertola
Publication Date: August 2014
Keyword(s): policy competition, public choice
JEL(s): F36, J08
Programme Areas: International Macroeconomics, Labour Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=10088

"Race-to-the-bottom" deregulation is to be expected when markets operate across the borders of countries that independently choose and enforce labor policies. Less obviously, in pre-crisis EMU reforms of labor market policies were uneven and related to international imbalances. That pattern is readily explained by this paper's model of financial integration between differently capital-abundant countries, within which labor policies benefit individuals with wealth/labor income ratios different from country's aggregate.