Labour and Financial Market Determinants of Investment Decisions in Europe (download PDF 178 Kb)

Giorgio Calcagnini

Abstract
This paper has aimed at analysing how labour and financial markets influence investment. Specifically, we stressed the importance of considering labour market conditions within the most traditional theoretical framework that assigns a significant role to financial market imperfections in determining capital accumulation. Investment is traditionally considered one of the most important economic variables. As a component of aggregate demand it helps determine both its level and volatility. On the supply side, it is the means through which innovations are introduced into the economy, it determines the expansion path of productive capacity and, therefore, provides opportunities to increase employment. Economic policies to promote investment should therefore promote policy moves towards more efficient capital markets and, at the same time, bargaining systems that help reduce labour market conflicts.