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CHAPTERI
Thereis,however,anumberofdemocraciesamongtheindustrialized
countrieswhereaneffectivelabormarketexists.Thereisalsoanumberof
democracieswitheffectivelabormarketpolicyamongthedevelopingcountries.
Similarly,inthecountriesinwhichthetransformationfromtheauthoritarian
regimetowardsademocracyistakingplace,avoidingunfavorablephenomenaon
alabormarketisoftenapriority.Forexample,theChileangovernmentmoved
towardsdemocracyandtofreetradeunionswithouthomeincomegrowth.The
endofoppressioninSouthKorea,in1987,startedthepartnershiprelationsin
fullofconflictsindustry(BanerjiandGhanem,1997).
Itisworthconsideringwhichofthetwopointsofviewpresentedabove
shouldbegivensupport,thatis,whichofthemistheproperone.Theanalysis
ofthatproblemmaybebasedontheGrossmanandHelpmanmodel(Grossman
andHelpman,1994).Thismodeldescribeseconomicdevelopmentonthebasis
oftwosectors-urbanized,regulatedprocessingsector,andrural,unregulated
agriculturalsector.Theprotectionofthelabormarket,especiallyofminimum
wages,isusuallyappliedinordertobringthebenefitsfortheemployeesof
theregulatedsector,sincethesectorofunregulatedemployeesdoesnotcome
underthelegislationconcerningthelabormarket.
Thesectorofregulatedemployees,andalsotheowners,demandfromthe
governmentthatitleadsaneconomicpolicythatisfavorabletothem.The
employeddemandhighminimumwages,whilecapitalistsdemandhighprofits.
Bothgroupsdemandtherestrictionsonthedegreeofeconomyopenness.In
aclosedeconomy,highermarketminimumwagesandhigherprofitsareusually
connectedwithhigherpricesforhomeconsumers,andthisisnoteasywhen
thoseconsumersarefreetobuythesubstitutesinformofimportedgoods.Thus,
incomesinaneconomymaybecreatedbyprotectionandlaterdividedamong
theemployeesoftheregulatedsectorandthecapitalists,althoughsometimesthe
governmentitselftakesapartofthoseincomes(BanerjiandGhanem,1997).
Agovernmentconductinganeconomicpolicytakesintoaccountanumberof
factors.Firstly,ithastodecidethedegreeofobtainingtheresources,thatis,how
muchfromthoseresourcesitwantstoobtain.Hencetheimportanceofinvestments
andoffutureeconomicgrowth,andalsoofdefiningthepossibilitiesforkeeping
thepoweritiscurrentlyholding.Secondly,thegovernmentshoulddefinethescale
ofsupportfromeachofthepressuregroupsthatcaninfluencethesituation.The
positionandimportanceofeachgroupforthedevelopmentofpoliticalprocesses
shouldbeconsidered.Forexample,inthecountrywheretheregulatedlabormarket
isdivided,andpoliticallyweak,onlythecapitalistsmayhaveadecidingvoicein
politicalprocesses.Andthecontraryalsohappens-inthesocietieswherethelabor
marketisorganized,itmayplaytheimportantroleinmobilizingvoters.
Howcanwerecognizethetypeofpower,thetypeofrule?Firstofall,we
shouldinvestigatewhatlevelofresourcesagivengovernmentisgoingtoachieve.
