Politico‐Economic Complementarities

Gilles Saint‐Paul

in The Political Economy of Labour Market Institutions

Published in print September 2000 | ISBN: 9780198293323
Published online November 2003 | e-ISBN: 9780191596841 | DOI:
 Politico‐Economic Complementarities

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This chapter discusses politico‐economic complementarities, i.e. the fact that a given institution, when in place, may create political support for another one. If complementarities prevail, reform packages are more politically viable than isolated reforms. Complementarities are strong between institutions that create rents, such as wage rigidity, and institutions that protect rents, such as employment protection. On the other hand, if exposure effects dominate, there is no politico‐economic complementarity between rent‐creating, or rent‐protecting institutions and unemployment benefits. Finally, complementarities arise if competing groups set their own level of rigidity.

Keywords: competing groups; epidemics of rigidity; politico‐economic complementarities

Chapter.  5379 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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