Labor Markets and Integrating National Economies

Article excerpt

Labor Markets and Integrating National Economies, by Ronald G. Ehrenberg. Washington, D.C.: The Brookings Institution, 1994. Pp. 126. $29.85 (hardcover).

The international economy is becoming increasingly integrated due to the reduction in transportation and communication costs and the emergence of multilateral and bilateral trade agreements. Labor markets have a wide range of characteristics that influence trade flows, capital and labor mobility, and the pace at which economic integration proceeds. In Labor Markets and Integrating National Economies, Professor Ronald G. Ehrenberg describes these characteristics and how they vary among nations. He proposes that the United States's system of federal fiscalism and the European Community's experiences provide lessons on reducing barriers to integration and suggests other potential policies to overcome barriers that may limit international economic integration. In addition, he discusses the pressures to change the characteristics of labor markets that arise from integration.

The chapters of the book raise four key issues. First, do differences in levels of standards, benefits, or hours of work across nations imply that unfair competitive practices are being pursued and that these must be modified before increased economic integration can proceed? Second, do existing institutional arrangements limit labor mobility in an undesirable way? Third, given the potential distributional effects of increased economic integration and the fact that its benefits are small for a large number of people, while its costs are large for a small number of people, are existing institutional arrangements sufficient to allow increased integration to occur? Finally, are there characteristics of labor markets that, if changed because of pressures for increased economic integration, may lead to efficiency loss?

Professor Ehrenberg examines these questions as applied to various aspects of the labor market. In chapter one, Professor Ehrenberg describes the general characteristics of labor markets, using unemployment insurance as an example to illustrate issues that arise in a world with fixed exchange rates. He then extends the analysis by allowing exchange rates to vary. …