TY - JOUR
T1 - FDI Deregulation Versus Labor Market Reform
T2 - a Political Economy Approach
AU - Jaeck, Louis
AU - Kim, Sehjeong
N1 - Funding Information:
Acknowledgements We thank the participants of the Western Economic Association International conference, Portland, OR, June 2016; the International Atlantic Economic Conference, Milano, Italy, March 11–14, 2015; the European Public Choice Society conference, Freiburg (Germany), April 2016; the Research Seminar at the Department of Economics and Finance, United Arab Emirates University, February 2016. We are also thankful for the UAEU support, Grant Number G00001588. We thank Mr. Shahabuddin Abdulrouf, Mr. Enayatulah Abdal Ghafoor and Mr. Hamid Tajjudin for their excellent research assistance. Finally, we thank two anonymous reviewers for their helpful comments on an earlier version of this paper.
Publisher Copyright:
© 2018, International Atlantic Economic Society.
PY - 2018/3/1
Y1 - 2018/3/1
N2 - This paper studies the political economy of foreign direct investment (FDI) in interaction with labor market policies. It analyzes the setting of reform focused on deregulating labor markets as a political compromise pressured by the lobbying of an industry lobby and a trade union. Using a common agency model of lobbying, we show that the interest group’s influence is socially distortive towards less deregulation. Also, our political economy framework shows that, for large countries, exogenous FDI liberalization policies lead to deregulation in the labor market. For small countries, such policies enhance more labor market rigidities.
AB - This paper studies the political economy of foreign direct investment (FDI) in interaction with labor market policies. It analyzes the setting of reform focused on deregulating labor markets as a political compromise pressured by the lobbying of an industry lobby and a trade union. Using a common agency model of lobbying, we show that the interest group’s influence is socially distortive towards less deregulation. Also, our political economy framework shows that, for large countries, exogenous FDI liberalization policies lead to deregulation in the labor market. For small countries, such policies enhance more labor market rigidities.
KW - Common agency
KW - FDI
KW - Labor market
KW - Lobbying
UR - http://www.scopus.com/inward/record.url?scp=85044195724&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85044195724&partnerID=8YFLogxK
U2 - 10.1007/s11293-018-9570-1
DO - 10.1007/s11293-018-9570-1
M3 - Article
AN - SCOPUS:85044195724
SN - 0197-4254
VL - 46
SP - 73
EP - 89
JO - Atlantic Economic Journal
JF - Atlantic Economic Journal
IS - 1
ER -