This paper by Marco Pagano and Paolo Volpin analyzes the political determinants of investor and employment protection. The authors develop a model that predicts that proportional electoral systems are more likely to result in weaker investor protection and stronger employment protection compared to majoritarian systems. This prediction is supported by international panel data, which show a significant negative correlation between the proportionality of the voting system and shareholder protection, and a positive correlation with employment protection. The study also explores other political variables that affect regulatory outcomes, particularly in the labor market. The origin of the legal system is found to have additional explanatory power only for employment protection. The paper contributes to the growing literature on the political economy of economic policy, highlighting the importance of the difference between majoritarian and proportional systems in shaping financial and labor market regulation.This paper by Marco Pagano and Paolo Volpin analyzes the political determinants of investor and employment protection. The authors develop a model that predicts that proportional electoral systems are more likely to result in weaker investor protection and stronger employment protection compared to majoritarian systems. This prediction is supported by international panel data, which show a significant negative correlation between the proportionality of the voting system and shareholder protection, and a positive correlation with employment protection. The study also explores other political variables that affect regulatory outcomes, particularly in the labor market. The origin of the legal system is found to have additional explanatory power only for employment protection. The paper contributes to the growing literature on the political economy of economic policy, highlighting the importance of the difference between majoritarian and proportional systems in shaping financial and labor market regulation.