Abstract
Drawing from various literatures, this article explores links between equity markets and labour market flexibility. Various data sources are used to test relationships for a set of OECD countries, controlling for other likely influences on flexibility such as government and industrial relations institutions. The results are generally supportive as regards employment flexibility: equity market trading activity is associated with shorter job tenure, higher activity rates, and greater employment change over the cycle. However, the relationship between equity markets and pay flexibility is less statistically robust to the addition of controls.
Notes
1. Functional flexibility is of interest but cross-national data are lacking.
2. There is the possibility that a reduction in employment, following hostile M&A activity, could be due to the fact that acquired companies were under-performing, so that the sample is in effect biased. Such under-performing companies would be more likely to require restructuring.