Abstract
This paper analyzes the setting of labor market reforms in the European Monetary Union (EMU), as a political compromise pressured by the lobbying of business interests and trade unions. Using a common agency model of lobbying, we model the impact of distorted and non-distorted Central Bank monetary policy on EMU member state incentives to reform its labor market. Paradoxically, a majority of citizens who do not support the reform can lead to an optimal level of reform. We also show that, in a context of EMU enlargement, inflationary policy generates a status quo if there is a majority of non-supporters. Surprisingly, inflationary policy enhances the reform if the share of non-supporters over supporters increases, and weakens it if this share decreases.
Original language | English |
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Pages (from-to) | 73-86 |
Number of pages | 14 |
Journal | International Advances in Economic Research |
Volume | 20 |
Issue number | 1 |
DOIs | |
Publication status | Published - Feb 2014 |
Keywords
- Common agency
- European Monetary Union
- Lobbying
- Monetary policy
- Structural reforms
ASJC Scopus subject areas
- Economics and Econometrics
- Economics, Econometrics and Finance(all)