Politics-Business Interaction Paths

Belloc, Marianna and Pagano, Ugo (2008) Politics-Business Interaction Paths. Working Paper. Dipartimento di Economia Pubblica, Università di Roma La Sapienza, Roma, Italia.

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Abstract

Countries characterized by strong workers’ political rights tend to exhibit a strong and concentrated corporate ownership structure. One explanation is that employees' political rights influence corporate governance: systems characterised by strong employees' rights tend to be balanced by strong and concentrated owners. In this approach, the separation between ownership and control is only possible when unions and social democratic parties are sufficiently weak. In this paper we argue that causation runs also in the opposite direction (from strong concentrated ownership to strong employees' protection) and leads to multiple equilibria characterized by alternative interaction paths of Politics and Corporate Governance. To empirically assess our theoretical arguments, we run Bayesian simultaneous equation estimation and perform Bayesian model comparison of the various theories for employment protection determination. We obtain that the concentration model is more likely than other models in the determination of employment protection. We conclude by exploring economic policy implications.

Item Type: Monograph (Working Paper)
Additional Information: JEL Classifications: G32, G34, J50, K22, P10
Uncontrolled Keywords: employment protection, corporate governance, ownership concentration, Bayesian model estimation, Bayesian model comparison.
Subjects: 300 Scienze sociali > 330 Economia
Depositing User: Dipartimento economia e diritto
Date Deposited: 15 May 2009
Last Modified: 20 May 2010 12:02
URI: http://eprints.bice.rm.cnr.it/id/eprint/871

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