Public policy, footloose capital, and union influence

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Palokangas , T 2020 , ' Public policy, footloose capital, and union influence ' , Review of International Economics , vol. 28 , no. 4 , pp. 976-991 .

Title: Public policy, footloose capital, and union influence
Author: Palokangas, Tapio
Contributor organization: Helsinki Centre of Economic Research (HECER), alayksikkö 2013-2021
Date: 2020-09
Language: eng
Number of pages: 16
Belongs to series: Review of International Economics
ISSN: 0965-7576
Abstract: This document sets up a unionized general oligopolistic equilibrium model of countries, where capital is footloose and governments maximize utilitarian welfare. When capital owners have weak influence on public policy, there is unemployment and the governments compete for jobs, causing a distortion with suboptimal wages. Then globalization -- as characterized by a decrease in impediments to international investment -- increases the wage elasticity of capital flight, decreasing wages and increasing employment. This benefits the capital owners and the unemployed workers getting a job, but harms the other workers. International coordination of public policy alleviates these consequences of globalization.
Subject: 511 Economics
Peer reviewed: Yes
Rights: cc_by
Usage restriction: openAccess
Self-archived version: publishedVersion

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