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Should market liberalization precede democracy? Causal relations between political preferences and development

Should market liberalization precede democracy? Causal relations between political preferences and development

Can the experience of communism and the following period of Transition be considered as of some help with this regard? To be sure, democracy and the market have been both abolished by the communist experience and one could consider as a crude approximation that all the countries of the former Soviet block and its satellites started at the same point in 1989. Of course, this is not quite true and it is well-known that there were marked differences between for instance Poland and Czechoslovakia, the former being more decentralized and the second more strictly conform to the pure Soviet model. But even if all countries of the former communist block were considered identical up to 1989, the evolution that they have known since that date cannot be thought to be exogenous; the development of market and democracy has evolved in parallel since 1989, probably under the influence of common factors. However, the specificity of the socialist block is the parallelism in the history of the constituent countries. Diverging forces have been unleashed only since the early 1990’s, and in contexts that continue sharing many similarities due to the identical Transition process that is going on. Hence, comparing the attitudes towards the market and the democracy of these countries is less farfetched than in other contexts. In more technical terms, when analyzing the relation between democracy and the market, the risk is high of omitting important variables, but the variation of these omitted variables is certainly smaller inside the considered group of Transition countries than it would be in a more general cross-country comparative study.
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How populist democracy promotes market liberalization

How populist democracy promotes market liberalization

5 Recent empirical work points to a reinforcing effect of political liberalization on economic liberalization at the macroeconomic level (Giavazzi and Tabellini 2005). Studies related to Central and Eastern Europe, with the exception of Finifter and Mickiewicz (1992), find that democracy facilitates economic liberalization (Fidrmuc, 2003; Hayo, 2004). However, demonstrating empirical relations of causality between democracy and market liberalization is a daunting task (Persson and Tabellini, 2007). This is because of the identification problem, which is contained in the very idea of the modernization theory (Lipset 1959) that the same development dynamics favor both democracy and market development. Subjective support to the market may be due both to the degree of democracy and to the degree of market development itself, which are difficult to disentangle as they are likely to develop at a parallel pace. Moreover, these subjective political attitudes altogether are likely to be influenced by common cultural and historical factors which are difficult to capture. Hence, assessing the direction of causality between the advancement of economic freedom and the degree of political freedom appears to be an almost impossible exercise in the absence of a valid exogenous instrument. Example of such instruments are legal origins (La Porta, Lopez-de-Silanes, Shleifer and Vishny, 1999) or colonial origins (Acemoglu, Johnson and Robinson, 2001).
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Democracy, Market Liberalization and Political Preferences

Democracy, Market Liberalization and Political Preferences

Schundeln, 2007). The very idea of “national culture” is that countries’ past experience continues to exert long-term effects (Fernandez and Fogli, 2005). 16 We therefore rely on the idea that citizens of countries that have belonged to formerly highly integrated zones share a common culture, i.e. common inherited attitudes towards the market and democracy. There are some subsets of the transition countries in which this assumption is particularly appealing. Regions that belonged to the Ottoman Empire (Albania, Bosnia and Herzegovina, Bulgaria, Bessarabia, Crimea, FYR Macedonia, Moldavia, outer Montenegro, Serbia, except Vojvodina, and Wallachia) developed under the same rule for several centuries (see Figure A1). 17 The same is true of regions of the Habsburg Empire (Croatia -except Dalmatia-, Czech Republic, Hungary, Polish Silesia, Slovak Republic, Slovenia, Transylvania and Vojvodina), of Prussia (Estonia, Latvia, Polish Silesia, Pomerania, Royal Prussia), countries of the former Polish-Lithuanian Commonwealth (which included Poland, Ukraine, Lithuania, Belarus and western parts of Russia), countries of the USSR (1922-1991), or countries of the Former Yugoslavia (Bosnia and Herzegovina, Croatia, FYR Macedonia, Montenegro, Serbia and Slovenia), who shared the same rule for several decades (1918-1991). Countries of Central Asia have also shared common influences practically until their independence in the early 1990’s, starting with Alexander the Great’s Empire, then under the Persian, Turkish, Mongol and Timuride Empires and finally under the Russian Empire and the Soviet Union. We thus retain these cultural and historical groupings in order to deal with the potential impact of cultural factors on attitudes towards the politico-economic system (we run sub-regressions inside each of these cultural zones).
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Migration, Sustainability and Democracy. Current Debates on Environmental, Social, and Political Issues

Migration, Sustainability and Democracy. Current Debates on Environmental, Social, and Political Issues

However, the situation in also difficult for non-EU nationals who come with a student visa and graduate in Switzerland. They face difficulties if they choose to stay in the country and look for a job, as a recent study has shown (Riano and Piguet 2018). For one, they fall under the yearly quota of non-EU migrants, but there are also other obstacles, such as the selection of preferred disciplines, and the difficulty in accessing relevant information. Moreover, those who remain after graduation may only stay for six months, which can be too short a time to find a job (Riano and Piguet 2018). There are thus a number of formal or semi-formal mechanisms like waiting periods or exclusion from language courses, the job market, or education. These add to the informal dynamics of exclusion and discrimination that exist, for example, in the labour market as a current study in Switzerland shows “that children of immigrants holding Swiss qualifications and dual nationality need to send 30% more applications to receive a call-back for an interview when applying for apprenticeship level occupations” (Zschirnt and Fibbi 2019).
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Social Democracy in Europe 4.0

Social Democracy in Europe 4.0

employment, a new definition of the ‘employment relationship’ is needed to clearly define individuals’ or employers’ or even consumers’ responsibilities for taking care of future social security, e.g. the obligation of the self-employed to contribute in one way or another to social insurance funds, or the inclusion of a social contribution in contract working or in the platform economy. Recognising that more and more workers in non-standard forms of employment have difficulties in exercising their rights at work or gaining access to social security benefits and that women and migrants are disproportionately affected by this problem, the EU Parliament also calls on the Commission and member states to organise social security schemes in such a way as to enable all people in all employment forms, employment relationships, and self-employment to accumulate entitlements providing income security in situations such as unemployment, involuntary part-time work, health problems, older age or career breaks for child-raising, other care or training reasons. Moreover, the European Parliament resolution on the EPSR accentuates the social right to equal opportunities and equal access to the labour market. One element is to make the market fit for the inclusion of persons with disabilities, for instance, through the right to decent and barrier-free work in a fully inclusive, open and accessible work environment; reasonable workplace adjustment; or to make the market fit for parents with various care obligations through accessible care infrastructure, paid care leaves, and variability in daily and weekly working time.
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Governance and Democracy - KATARSIS Survey Paper

Governance and Democracy - KATARSIS Survey Paper

markets, far from being the naturally arising order, are man-made institutions as well (Dugger 1989: 609), embedded in society (Polanyi 1978). Markets are institutionalised patterns of behaviour whose concrete appearance is heavily influenced by, amongst other things, the existing legal framework. The legal setting predetermines the “relative rights, relative exposure to injury, and relative coercive advantage or disadvantage” (Samuels 1981: 100) of the different actors. Thus, it partly anticipates the allocative and distributive results of the market forces. It goes without saying that different market participants have a strong interest in having a legal framework favouring their respective interests. The place where the contest for control of the legal setting is fought out is the state as the central law-making institution, which has to mediate between the competing interests (cf. Jessop 1990; Poulantzas 2001), as it is impossible to secure all interests at the same time (Samuels 1981). Law is essentially of a dual character, protecting some interests while at the same time necessarily restricting others (Samuels 1989: 430). As the legal framework in modern societies is not static but constantly evolving, the control of the state apparatus is being incessantly contested for (Brown 1992: 13). The chances for success of the different actors are largely dependent on their relative power positions (Medema 1989: 422). Capital owners – by way of their “exit option” (Hirschman 1970) – can disrupt whole economies. Thus, Jessop (2002) insists that the capitalist state is a “strategically selective” terrain, which creates social exclusion by structuring decision making power unevenly.
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Political Ideology and Economic Growth: Evidence from the French Democracy

Political Ideology and Economic Growth: Evidence from the French Democracy

Among the scant empirical evidence of an ideological effect on growth, Bjørnskov (2005) initially uses OECD data for the period 1970–2000, to show that countries to the right of the average experience more growth, especially thanks to better legal systems and less government intervention. Accordingly, Bjørnskov (2008) provides evidence that the higher the income inequalities are, the more a government shift to a right-wing ideology improves growth. In contrast, Osterloh (2012), using OECD data for recent periods, provides evidence for the absence of growth effect of an aggregated index of ideology. However, he shows that parties with preferences corresponding to market intervention and welfare state policies impact negatively on growth. Most of the empirical research on the effects of political ideology has in common the use of time-varying ideology indexes, based on the party’s manifesto. In this regard, our paper differs from the existing literature in that we study the effect of ideology measured by the actual composition of the parliament, according to the right-left divide of the times. We do not need here to associate a certain group of parties (left or right) with certain sets of policies. Indeed, in all bi-party democracies, one can clearly identify a right and a left at any period of time, while it is impossible to define ex ante the content of a right-wing (or left-wing) policy.
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From Democracy by Proxy to Stakeholder Democracy. The Changing Faces of an EU Founding Value

From Democracy by Proxy to Stakeholder Democracy. The Changing Faces of an EU Founding Value

efficient in the way issues are framed and set on the European agenda. The European policy know-how are expected better then a general polity set of ideas. Finding support in the dictates of managerial pragmatism and government expertise, as well as by the normativity of the new theory of democracy, they have seized the opportunity afforded by crises in the European institutional model and proposed a recasting of the principles legitimizing bureaucratic government (Neyer, 2012). The contribution of non-institutional actors to this process is based on various practices incentivizing adherence to European reformism: by conviction, from self- interest (direct access to decision-making spaces, institutional recognition and certification, allocations of grants and funding). This process of theoretical and political conversion of the European Union to participationism seems to have been constructed by managing to reconcile, once again, the left hand of political Europe (that of a 'Europe of peoples' advocated by parties and organizations defending values like the social dialogue and an ethical and progressivist civil society) and its right hand (that of a pragmatic Europe of the market, turned towards economic actors and special interest groups). By doing so, a civil society 'based on cooperation with institutions much more than on dissent' (Bouza Garcia, 2015, p. 20) has been placed at the heart of the action. From this point of view, the proximity of the European Union's institutional participationism to the semantic and operation register of New Public Management is striking: the new style of European government, behind the justifications and narratives of its official historiography, can easily be analysed as a mechanism for governmentality inspired by neoliberalism (transparency of procedures and competition between interests). Probably the more effective synthesis of values coming from two separate universes.
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Democracy and social democracy facing contemporary capitalisms: A "régulationist" approach

Democracy and social democracy facing contemporary capitalisms: A "régulationist" approach

I NTRODUCTION : W HAT RELATIONSHIP BETWEEN ECONOMY AND POLITY IN CONTEMPORARY SOCIETIES ? After the collapse of Soviet Union, many observers and analysts had accepted a common diagnosis concerning the future of modern societies: they should converge towards a canonical socioeconomic regime featuring the complementarity between a market economy and the diffusion of democracy (Fukuyama, 1992). They were supposed to replace the previous planed economies governed by authoritarian political regimes. In retrospect, this prognosis is far from confirmed by the evolution of the two last decades. On one side, the transition from plan to market has proven to be much more difficult than expected (World Bank, 1993). Instead of being an obstacle to the implementation of market logic, a form of another of State is required in order to deliver the prerequisites for the implementation of market mechanisms. On the other side, democracy does not appear any more as the automatic outcome of the collapse of authoritarian regimes. Clearly, the political transformations in Iraq from instance have not at all followed the same trajectory than Europe or Japan after the Second World War: social peace, empowerment of citizens and democratization. Organizing general elections does not necessarily open the path to democratization. Similarly, a modern, efficient and legitimate State cannot be imported, since it has to be generated by the very domestic processes of interacting and negotiating socioeconomic groups (Fukuyama, 2004).
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Trade and democracy. An empirical investigation.

Trade and democracy. An empirical investigation.

According to Mansfield, Milner & Rosendorff (2000), if there are divergent opinions in a country about the opportunity to reduce its own tariffs, everybody agrees with the openness of foreign markets. Even if legislators, influenced by specific or regional lobbies, are more protectionists than the executive component of power, they may accept trade measures opening the national market if reciprocally the other country makes similar concessions. Using a negotiation game, the authors conclude that two democracies are more likely to enter into a reciprocal trade agreement than a democracy-autocracy couple. They cannot conclude about the expected relations between two autocracies. In a different paper, the same authors (Mansfield, Milner & Rosendorff, 2002) assume that leaders are more protectionists than their electorate, which is, moreover, badly informed on their intentions. The electorate wrongly attributes bad economic performances to a restrictive trade policy and may punish the government for bad reasons. Then, an international trade agreement would signal a pro-trade commitment from their government in the aim to remove uncertainty on the responsibility of politicians. This function of the trade agreement would be all the clearer since it includes sanctions and trade policy review mechanisms, what is the case for the WTO and some regional agreements. The authors find an empirical evidence that the probability to have two countries inside a trade agreement increases when both are democratic.
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Trade costs and democracy

Trade costs and democracy

These pessimistic approaches are based on very questionable assumptions and indicators. The general evolution towards free trade and democracy discredits the idea that protectionist lobbies dominate democratic countries. Indeed, concentrated and organized industries are also present amongst free-trade partisans. Export firms fear protectionism, which closes access to foreign markets. Numerous industries are concerned with the import of low-priced inputs. The "political market" alternative in democracies is frequently a higher degree of corruption in authoritarian countries. Oligarchies make the setting up of anti-corruptive and counter-power institutions more difficult, even though they have more authority to fight corruption. Enlightened tyrants are undoubtedly less common than predatory tyrants. Wei’s empirical study (2000) highlights a negative (albeit weak) relation between democracy and corruption as well as between "natural" openness and corruption. However, he cannot verify a relation between corruption and trade policy.
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Market failure, inequality and redistribution

Market failure, inequality and redistribution

normative economics, such distributive effects can be mediated and cancelled by redistribution policies. Indeed, the very idea of "paying" people to refrain from aggression may be controversial from an ethical viewpoint. In our view, a significant limitation of the traditional separation between efficiency and distribution problems lies in restrictions on carrying out compensating transfers. In practice, transfers are not costless and may be difficult to perform for various reasons (technical, political, etc.). A state apparatus with the ability to tax citizens is typically needed to make transfers between the members of society, whether such transfers are monetary or in-kind. What are the costs (eventually, efficiency costs) of taxation schemes needed to finance redistribution? Can a general redistribution scheme (such as a negative income tax, or some improvement) fulfill the task of redistributing economic well-being in any desired way? This raises a more technical question: is it possible to modify traditional efficiency analysis to allow for non-neutral redistribution? In principle, nothing precludes one from taking such difficulties into account. In particular, this involves the addition of restrictions affecting the transfer process to the usual analysis, and second-best techniques may be applied [Lipsey and Lancaster (1956)]. These complications have received relatively little attention and may be worth further research.
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Democracy and the Politicization of Inequality in Brazil, 1989-2018

Democracy and the Politicization of Inequality in Brazil, 1989-2018

5 political instability in early 1960s, which fed into the military coup of 1964 on the Labor Party executive of João Goulart (Morgan and Souza 2019). The military dictatorship (1964-1985) abolished the elections for the President of the Republic and State Governors for the large part of its reign, banning all previously existing parties. Direct elections could only be held for federal and state deputies and municipal councilors among permissible candidates, because a two-party system was imposed, with on one side the military’s National Renewal Alliance (Aliança Renovadora Nacional, ARENA), and on the other side the artificial ‘catch-all’ opposition, the Brazilian Democratic Movement (Movimento Democrático Brasileiro, MDB). The 1979 reforms saw the military government abandon the two-party system in order to split the opposition, which was gaining electoral ground. ARENA was dissolved and replaced by the Democratic Social Party (Partido Democrático Social, PDS), while the MDB rebranded into the PMDB. New parties were formed including the leftist Worker’s Party (Partido dos Trabalhadores, PT) and the centre-right Brazilian Social Democracy Party (Partido da Social Democracia Brasileira, PSDB). Literacy had increased dramatically until the new Republican constitution, which ended its requirement. Since then, the share of voters has stabilized at around 75-80 percent of adults. 5 The importance of income and education for electoral participation was further attenuated by other equally important policies, such as holding elections on Sundays, free media access to electoral campaigns and electronic voting (Arretche ed. 2019).
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State and market interaction: cotton variety and seed market development in China

State and market interaction: cotton variety and seed market development in China

3.6. Excessive competition detrimental to the variety market sustainability The column "b" in the Table 3 corresponds to the number of varieties which have reached the area threshold of 100 000 mu (6667 ha) at least one year during each of the two periods considered (before and after 2000). It is quite clear that, before 2000, all varieties used have succeeded to reach this threshold, at least one year. This is not the case since 2000, for 169 varieties, or more precisely for the 99 new varieties launched since 2000 (after deduction of the 73 varieties which were yet used before 2000). This is an indication that one third of the varieties commercially released did not meet market success. Given the total area recorded for all varieties (column "c"), and if the market was equally distributed between varieties, the total area per variety can be deducted for each period (column "d"), or the mean area per year (column "e"). At national level, the yearly mean area per variety has decreased somehow substantially. In other words, the offer augmentation of varieties automatically leads to the diminution of the market share for each variety, when the market distribution is assumed to be equal. So, the more dynamical cotton breeding is, higher is the competition between varieties at the expense of the profitability to the breeding units.
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Democracy, Elections and Allocation of Public Expenditure in Developing Countries

Democracy, Elections and Allocation of Public Expenditure in Developing Countries

Democratic political institutions would provide those political incentive structures able to induce better policy choices. Elections prompt accountability in two ways. They provide political competition, and help governance to be more efficient by alleviating the moral hazard issue (Barro, 1973; Ferejohn, 1986) or mitigating the adverse selection phenomenon (Rogoff, 1990). By weeding out incompetent politicians and giving those in power an incentive to put in effort, elections are believed to provide suitable incentives for an efficient governance. However, governments have an additional motive. Indeed, they face now a new constraint: they have to renew their legitimacy in the periodical recurrence of elections. Therefore, electoral pressure may lead politicians to manipulate public policy in order to increase their chances of re-election. Political business cycles theory provides a usefull analytical context. 1 Based on political markets imperfections, and most notably on information asymmetries, such a theory highlights the distortions induced by the recurrence of elections. Empirical studies in the 1970s until the early 1990s focused almost exclusively on industrialized countries, and generally do not find regular, statistically significant political budget cycles (see Alesina and alii, 1997; Drazen, 2001, for excellent reviews). In contrast, more recent studies (Remmer, 1993; Schuknecht, 1996; Shi and Svensson, 2002; Brender and Drazen, 2005a) have not only confirmed the existence of polically-driven budget cycles in developing countries, but have also shown the large magnitude of these cycles. Before elections, public spending increases, while revenues fall, thus leading to a large budget deficit in election years. In addition, in developing countries, much of the election-
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European Union, A Stakeholders' Democracy

European Union, A Stakeholders' Democracy

chercheurs de ce programme publient 33 articles entre 2006 et 2011 dans ces trois revues, dont un numéro spécial du Journal of European Public Policy en 2007 (Schmidt, 2007). On peut noter ici la relative indépendance critique de ces auteurs à l’égard des positions défendues par les institutions de l’Union européenne. Certaines de leurs analyses déconstruisent, voire rudoient le tournant participatif en cours (Smismans, 2008 ; Cram, 2011), soulignant la faiblesse conceptuelle de la nouvelle « gouvernance » ainsi que sa normativité sans toutefois révoquer les perspectives ouvertes par ce concept (Schmidt, 2007 ; Treib et al., 2007 ; Bartolini, 2010). Dans le même ordre d’idées, on pourrait évoquer le projet CONNEX (« Connecting Excellence on European Governance ») dirigé depuis le MZES de l’Université de Mannheim par Beate Kohler-Koch pour qui « efficiency and democratic accountability is needed because it is the very foundation of legitimate governance ». Là encore, ce projet a pu publier au cours de la période un numéro spécial, coordonné par Ronald Holzhacker, du Journal of European Integration (29(3), 2007) portant sur « Democratic Legitimacy and the European Union » et un autre coordonné par Antje Wiener du Journal of Comparative European Politics (5(1), 2007) portant sur « Contested Meanings of Norms - The Chalenge of Democratic Governance Beyond the State ». Plusieurs des chercheurs du premier ont collaboré au second. Si ces deux projets méritent attention, c’est qu’ils représentent des formes idéales- typiques de travaux à la normativité assumée autour de la question de la recherche du « bon gouvernement ».
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Market Failure, Justice, and Preferences

Market Failure, Justice, and Preferences

the Rawlsian view concerning the primacy of justice is sound, we should only care about the failure of markets to achieve Pareto optimal outcomes to the degree that justice assigns importance to the achievement of Pareto optimality. Moreover, the discovery that a market is technically efficient does not provide sufficient reason for viewing it as suitable or defensible institution for provision and distribution of certain goods. In some instances, we may have justice-based reasons to prefer non-market arrangements or highly regulated markets to free market arrangements market that are, in the technical sense, efficient. Narrow market failure is not a conceptually defective notion but it offers, at best, an incomplete specification of the evaluative criteria that are relevant to the goal of assessing the adequacy of actual market arrangements. I have suggested that considerations of justice, not technical efficiency, are credibly seen as the primary criteria for assessing whether markets are functioning well or failing. If this is right then technical inefficiency need not be the only or even the most important variety of market failure.
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Multi-Market trading and Market Liquidity: the Post MiFID Picture

Multi-Market trading and Market Liquidity: the Post MiFID Picture

o Global: consolidated across markets by comparing the highest bid quote of all markets with the lowest ask quote of all markets o Sample mean: market-value weighted ● Average effective spreads: 2(Price it – Mid it ) / Mid it o Local: average over the transactions of a given market

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Advertising and market structure

Advertising and market structure

of advertising and price competition, respectively, in a market with product.. differentiation.[r]

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Do capital market and trade liberalization trigger labor market deregulation?

Do capital market and trade liberalization trigger labor market deregulation?

Equation (15) is easily interpreted. In the open economy, unemployment is driven by two channels. The first is the “sectoral unemployment” which directly leads to the autarky unemployment rate and to the first term on the RHS. The second channel is the number of sector-R firms producing domestically, which leads to the second term. Therefore, full employment is reached either because the LM is deregulated ( γ = 0 ⇔ ν = 1 ) which eliminates the primary cause or because the R-economy is aggregated in the foreign country ( s n = 0 ). We can therefore expect the open economy unemployment rate to be hump shaped, as a function of the workers’ bargaining power. This is a result of the conflicting effects of the increase in the “sectoral” unemployment rate and of capital outflow, which triggers the decrease in the share of sector R in domestic production. The outcome, that unemployment tends to disappear when relocations expand, could at first seem strange. However, this follows very logically from two assumptions. First, the adjustment of labor in the path towards the open economy is neglected, as the equilibrium described here corresponds to the long run equilibrium. Second, it is a direct consequence of the LM model based on the trade-off between regulation and unemployment. Concretely, it implies that the unemployment which disappears with the shrinking of the rent / unionized sector is the part of total unemployment resulting specifically from the insider / outsider conflict. Given the levels of the trade costs and bargaining power, equations (14) and (15) define the location of firms and the equilibrium unemployment rate, leading to Proposition 1A.
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