DP10088 | Labor policies and capital mobility in theory and in EMU

Author(s)

Publication Date

03/08/2014

JEL Code(s)

Keyword(s)

Programme Area(s)

Abstract

"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.