Working Paper: NBER ID: w15747
Authors: Alberto F. Alesina; Yann Algan; Pierre Cahuc; Paola Giuliano
Abstract: Flexible labor markets require geographically mobile workers to be efficient. Otherwise firms can take advantage of the immobility of workers and extract rents at the expense of workers. In cultures with strong family ties, moving away from home is costly. Thus, to limit the rents of firms and avoid moving, individuals with strong family ties rationally choose regulated labor markets, even though regulation generates lower employment and income. Empirically, we do find that individuals who inherit stronger family ties are less mobile, have lower wages, are less often employed and support more stringent labor market regulations. We find a positive association between labor market rigidities at the beginning of the twenty first century and family values prevailing before World War II, and between family structures in the Middle Ages and current desire for labor market regulation. Both results suggest that labor market regulations have deep cultural roots.
Keywords: Labor Market Regulation; Family Values; Cultural Economics; Immigration
JEL Codes: J2; K2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Stronger family ties (J12) | Preference for regulated labor markets (J48) |
| Family values before World War II (J12) | Labor market regulations in the early 21st century (J48) |
| Second-generation immigrants from familistic societies (F22) | Lower mobility (J62) |
| Second-generation immigrants from familistic societies (F22) | Lower wages (J31) |
| Second-generation immigrants from familistic societies (F22) | Greater demand for government regulation of labor markets (J48) |
| Family values (J12) | Economic behavior and regulatory preferences (K23) |