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IOS Regensburg 12.–13. April 2018

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Aktuelles – Details

25. Juli 2017
Vorträge

Trade patterns and institutional trade-offs

Ein Vortrag von Richard Frensch (IOS, Universität Regensburg) und Stephan Huber (Universität Regensburg) im Rahmen der Seminarreihe des AB Ökonomie am IOS.
Datum: 25. Juli 2017
Zeit: 13.30 Uhr
Ort: WiOS, Landshuter Str. 4 (Raum 109)

There are (at least) two mechanisms to connect labor market institutions (LMI) to our ongoing work on the Rule of Law: (1) Following Levchenko (2013), we argue that low investment efficiency due to hold-ups particularly in complex production relationships between investors and non-investors (i.e., labor), may be aggravated by bad Rule of Law creating rents. However, the same is true for more power on behalf of labor to redistribute rents away from investors, potentially linked to rigid labor market institutions. (2) Caballero et al. (2013) emphasize the key distinction between official and effective labor market regulation, measuring effective labor regulation by interacting official measures of job security provision with measures of Rule of Law (and government efficiency), and find that job security regulation hampers reallocation and restructuring, especially in countries where the Rule of Law is strong. We find that in the long run non-poor countries with (Rule-of-Law independent) higher propensities to export Rule-of-Law intensive goods have less rigid LMI; i.e., we find a negative cet. par. impact from RoL-intensity within the fragmented goods category on labor market rigidity (LMR). Within the framework of hold-up and incomplete contracts foundations of trade theory explanations to why we observe differences in institutional quality across countries, this appears to motivate an institutional trade-off when opening up an economy to foreign competition: to avoid losing all rents to foreign producers, labor in complex production relationships faces the choice to either lobby for higher quality of the Rule of Law or for lower degrees of labor market regulation. Also, effective labor market rigidity appears to be a relevant concept: in the long run, countries with (effective LMR independent) higher propensities to export effective-LMR-intensive goods have more rigid effective LMR.