Endogenizing Labor Mobility: A Partisan Politics Explanation

Much of the existing literature shows that factor mobility across industries has important political economic implications but that it is exogenous to the political process. This article argues that labor's mobility across industries can be endogenous to changes of power relations due to partisan reasons. Based on a general equilibrium model, the prediction is that, when unions are decentralized, governments led by left-wing parties seek and obtain higher labor mobility than do governments led by rightist parties. However, as unions become more centralized, this distinction becomes less clear-cut. Time series cross-sectional analyses of OECD countries from 1960 to 1999 support this prediction and the endogenous labor mobility hypothesis.