By Issam K. H. Halayqa
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Certainly, the rhetoric of European Unions in support of labor market regulation suggests that they defend the underprovided workers against the business community, but this may just be precisely, rhetoric. There is in fact an increasing awareness in Europe that these labor market regulations, perhaps originally introduced with a sincere aim of protecting the disadvantaged, have produced more harm than good. For our purposes, one may argue that labor market regulations tend to redistribute in favor of labor, but not necessarily in favor of the poorest and least protected part of the labor force.
Disney and Whitehouse (2002) review studies comparing poverty among the elderly internationally. For our purposes, the most interesting ﬁnding is that with the exception of Greece, the United States 7 In the model by Conde Ruiz and Profeta (2002) the rich would prefer no social security system at all, but in a majority voting equilibrium the rich would favor a small Beveridgean system versus a large Bismarckian one. The poor would prefer a Beveridgean system as long as it redistributes enough; the middle class would prefer a Bismarckian one.
In fact, as noted by Joskow and Rose (1989) after an extensive survey of the literature, our understanding of the distributional consequences of several aspects of regulatory policy is very limited. The traditional view of regulation holds that regulation is necessary to correct for market imperfection, such as natural monopolies. This is only part of the story. Another important part is given by the “public choice” approach (Becker 1983) in which regulators react to lobbying efforts, and the resulting regulation has very little to do with efﬁciency.