Do capital market and trade liberalization trigger labor market deregulation?

Abstract

Glenn Rayp and two anonymous referees for their very helpful comments.

Unemployment and relative labor market institutions between trading partners

“…Davidson and Matusz (2005), Moore and Ranjan (2005) and Cuñat and Melitz (2007) provide evidence that labor market institutions affect comparative advantages. Boulhol (2009) and Helpman and Itskhoki (2010) highlight how trade liberalisation affects unemployment through specialization effects when countries differ in either union power or hiring costs, respectively. For example in Boulhol (2009), the threat of relocations, which trade integration makes even more credible, encourages labor market deregulation in the highly-regulated country to avoid capital outflows, thus leading to a decrease in unemployment.…”

“…Boulhol (2009) and Helpman and Itskhoki (2010) highlight how trade liberalisation affects unemployment through specialization effects when countries differ in either union power or hiring costs, respectively. For example in Boulhol (2009), the threat of relocations, which trade integration makes even more credible, encourages labor market deregulation in the highly-regulated country to avoid capital outflows, thus leading to a decrease in unemployment. In an earlier contribution, Davidson et al (1999) show that trade liberalisation between two countries, one of which is a capital abundant large country with a more efficient labor market, leads to higher unemployment in that country.…”

Mary Parker Follett, managerial responsibility, and the future of capitalism

“…However, globalization has not significantly increased labor mobility, as laborers cannot as readily move to where jobs-particularly those offering higher wages-are located (Boulhol, 2009). Given this enacted attitude that these global, low-skill workers as a class provide a limitless resource irrespective of the fate of any one worker, where employers only need to move onto the next source of low wage work, once a source is ''used up,'' (Ackbar & Abbott, 2003) there is little incentive to invest in a long-term relationship with these employees through the integration of these employees' concerns into the decisions made by the organization.…”

FDI, Skill-Specific Unemployment, and Institutional Spillover Effects

“…One can solve the standard utility maximization problem of the representative consumer who maximizes utility (1) subject to the budget constraint, which depends upon prices, consumption, and income available for consumption. The first order condition of the utility maximization problem yields equation (2).…”