Labor Market and Globalization: A Comparison of the Latin American and the East Asian Experiences in the 1980s and 1990s

In this paper we analyse the labor market and its relationship with globalization in two groups of countries similar in their GDP per capita levels at the beginning of the 1980s but otherwise significantly different in their economic and social structures. On the one hand we look at Argentina, Brazil and Chile, on the other hand we analyse South Korea, Taiwan and Thailand. It is argued that the Latin American group adopted pro-globalization policies too quickly and without an adequate social safety net, and that the East Asian group was particularly vulnerable to the 1997 crisis in connection with an ill-designed financial markets liberalisation and poor labor market policies. We suggest that the high social costs of labor market imbalances generated throughout the 1980s and 1990s in these two groups of countries should have been tackled within an encompassing development strategy, with an eye at social safety nets and labor supply policies – such as active and passive labor market institutions – designed for each country specifically.globalization, labor market, Latin America, East Asia

Rule of Law, Institutional Quality and Information

The focus of this paper is the analysis of the persistent lawlessness attitude observed in some transition and developing countries where an overall increase in the quality of institutions is recorded. The mechanism of information diffusion on institutional quality is explored using a model where the state confronts a continuum of agents prone to either strip assets or to invest. The model predicts that high uncertainty and potential sunk costs in a situation of rule of law enforcement push the economy towards anarchy, a Pareto-dominated equilibrium. Vice versa, if the assets' value and the cost of asset-stripping are high, this is instrumental to a rule of law enforcement, a Pareto-dominant equilibrium. High institutional quality can increase the likelihood of rule of law enforcement if there is enough information about the strength of institutions. On the other hand, if good institutions and good information about institutions do not come together, there is scope for the puzzled co-existence of advancement in reforms and poor property rights protection.rule of law, institutions, global games

Unique Equilibrium in a Model of Rule of Law

This paper presents a model of Rule of Law in which a continuum of agents plays against the State for the appropriation of the economic assets of a stylised economy. The model shows how each agent can either challenge the State or acquiesce, with the latter having the choice of either protecting property rights or abandoning the economy to anarchy. Players' payoffs are affected by strategic complementarities, not only between State and agents but also among agents themselves. As a consequence of this, a Coordination Failure is generated. The solution of the game is given by two Pareto-ranked Nash equilibria emerging from the context. Introducing idiosyncratic information and sequential play generates a unique equilibrium, according to the global game approach. On the one hand, this model predicts that high uncertainty and sunk costs in law enforcement have a negative effect, pushing the economy towards a Pareto-dominated equilibrium. On the other hand, the high value given to the economy's assets (embedded social norms) has a positive influence, leading to a Pareto-dominant equilibrium.Rule of Law, Coordination Failure, Global Games

Speed of Transition, Unemployment Dynamics and Nonemployment Policies: Evidence from the Visegrad Countries

In Central and Eastern Europe the restructuring process of large state enterprises had the effect of increasing unemployment. Social policy expenditure, in particular nonemployment policies, grew faster then expected due to the need of financing the \textit{out of labor force} categories. The interactions among unemployment, speed of transition and nonemployment subsidies/pensions are studied taking into account the shrinking labor force during transition. The reallocation of workers from the state to the private sector imposed a heavy burden on the budget deficit due to the increased social policy expenditure. This combination of effects is captured by a model of the speed of transition, in which a non-constant labor force is considered as well as the opposition of the insiders to restructuring is accounted for. After the reforms of the so-called Passive Labor Market Policies (PLMPs) at the beginning of 1992, there was a slowing down of the transition and this is has not been yet completely explained by the Optimal Speed of Transition (OST) literature.Unemployment, Model of Transition, Social Safety Net

Labor Market Policies, Institutions and Employment Rates in the EU-27

We compare labor market policies, institutions and outcomes for the EU member states, for the period 2000-2005. We document the main differences in Labor Market Policies across EU members, including new member states after 2004. We focus on indicators of policy generosity (expenditures relative to GDP) and relate these and other policy indicators to indicators of labor market outcomes and performance. Our results show that, on a cross-country basis, higher rates of employment are in general associated with: (i) higher expenditures on labor market policies, especially on active policies for countries with a high pro-work attitude; (ii) a lower degree of rigidity in labor market institutions and in product market regulation.labor market policies, labor market outcomes, European social models

Rule of Law, Institutional Quality and Information

The focus of this paper is the analysis of the persistent lawlessness attitude observed in some transition and developing countries where an overall increase in the quality of institutions is recorded. The mechanism of information diffusion on institutional quality is explored using a model where the state confronts a continuum of agents prone to either strip assets or to invest. The model predicts that high uncertainty and potential sunk costs in a situation of rule of law enforcement push the economy towards anarchy, a Pareto-dominated equilibrium. Viceversa, if the assets' value and the cost of asset-stripping are high, this is instrumental to a rule of law enforcement, a Pareto-dominant equilibrium. High institutional quality can increase the likelihood of rule of law enforcement if there is enough information about the strength of institutions. On the other hand, if good institutions and good information about institutions do not come together, there is scope for the puzzled co-existence of advancement in reforms and poor property rights protection

Institutions and Entry: A Cross-Regional Analysis in Russia

We analyse a micro-panel data set to investigate the effect of regional institutional environment and economic factors on Russian new firm entry rates across time, industries and regions. The paper builds on novel databases and exploits inter-regional variation in a large number of institutional variables. We find entry rates across industries in Russia are not especially low by international standards and are correlated with entry rates in developed market economies, as well as with institutional environment and firm size. Furthermore, industries that, for scale or technological reasons, are characterised by higher entry rates experience lower entry within regions affected subject to political change. A higher level of democracy enhances entry rates for small sized firms but reduces them for medium or large ones.entry rate, institutions, democracy

Institutional Determinants of New Firm Entry in Russia: A Cross Regional Analysis

We analyse a three-year panel data set of Russian firms spanning from 2000 to 2002 and we investigate the effect of regional institutional and economic factors on entry rates across time, industries and regions. The paper builds on a novel database and exploits inter-regional variation in a large number of institutional variables. We find entry rates in Russia are not especially low by international standards and are correlated with natural entry rates, institutions and firm size. Furthermore, industries that - for scale and technological reasons - are characterised by higher entry rates will experience lower entry within regions affected by higher business risk. In other words industries that naturally have low entry barriers are most affected by business constraints.Tobit model, business environment, entry rate

Institutional Determinants of New Firm Entry in Russia: A Cross Regional Analysis

We analyse a three-year panel data set of Russian firms spanning from 2000 to 2002 and we investigate the effect of regional institutional and economic factors on entry rates across time, industries and regions. The paper builds on a novel database and exploits inter-regional variation in a large number of institutional variables. We find entry rates in Russia are not especially low by international standards and are correlated with natural entry rates, institutions and firm size. Furthermore, industries that - for scale and technological reasons - are characterised by higher entry rates will experience lower entry within regions affected by higher business risk. In other words industries that naturally have low entry barriers are most affected by business constraints

The Impact of FDI and Financial Depth on EU Regional Growth: Income and Spatial Heterogeneity

Background and objective: The paper explores the impact of foreign direct investment and financial development on regional growth at the EU regional level for 2005–2017. Both FDI and financial development are important determinants of the regions’ growth, but not for all EU regions homogeneously. Some EU regions seem to benefit more than others, depending on certain characteristics, which implies that FDI attraction policies need to bear in mind not only country specificities, but also regional specificities, hence confirming the need for developing FDI attraction policies at the subnational level: financial development, capacity building, and Investment Promotion Agencies are key, for example. Methods: The methodology used in the paper relies on a beta-convergence model and on fixed effects estimation. In addition, a GMM difference model accounts for endogeneity. Results: Our empirical findings indicate that, in less wealthy (and more peripheral) regions compared to wealthy regions, FDI productivity spillovers are more significant. In other words, in less wealthy regions, the imitation effect prevails over the competition effect. Conclusions: FDI and financial development are important determinants of regional growth, especially for less developed and peripheral regions. Contribution/value: Financial development is shown to be a crucial determinant for economic growth at the regional level, especially for peripheral regions, which raises essential policy implications, especially for the sake of economic disparities in the EU NUTS 2 regions. In other words, local access to finance, especially to bank credit, plays a crucial role for regional growth, despite the continuous integration of financial markets. Also, there is an income and geographic heterogeneity when it comes to estimating FDI spillovers; therefore, the impact of FDI on growth is not always homo- geneous across territories, which challenges the idea of simple “bright” or “dark” sides to the effects of FDI