Worker rights and financial stability

In response to increasing financial instabilities in emerging economies, policy makers have focused on possibly stabilizing institutions. Worker rights have the potential to be stabilizing since they may aid in productivity growth and since they may help to allocate economic resources more equitably between labor and capital. As supply and demand become more likely to grow together than apart, the chances for financial crises may be reduced. This article's results confirm that liberalized economies are more likely to experience banking crises and that worker rights may be a stabilizing institution.