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| Author: | Grüner, H.P. |
| Title: | Unemployment and labor-market reform: a contract theoretic approach |
| Journal: | Scandinavian Journal of Economics
2002 : VOL. 104:4, p. 641-656 |
| Index terms: | Labour markets Reforms Unemployment |
| Language: | eng |
| Abstract: | The main question asked in this article is why do many democracies fail to reform their labour-market institutions. The feasibility of reforms that include compensation to insiders for the removal of labour-market regulations is studied to answer the question. Under asymmetric information, a reformer who wants to buy the approval of voters has to pay them an informational rent in addition to the pure costs of compensation that would arise under symmetric information. Unemployment may be constrained Pareto-efficient in this setting. |
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