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Can Policy Influence Culture? Minimum Wage and the Quality of Labor Relations

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  • Aghion, Philippe
  • Algan, Yann
  • Cahuc, Pierre

Abstract

Can public policy affect culture, such as beliefs and norms of cooperation? We investigate this question by evaluating how state regulation of minimum wage interacts with unionization behavior and social dialogue. International data shows a negative correlation between union density and the quality of labor relations on one hand, and state regulation of the minimum wage on the other hand. To explain this relation, we develop a model of learning of the quality of labor relations. State regulation crowds out the possibility for workers to experiment negotiation and learn about the true cooperative nature of participants in the labor market. This crowding out effect can give rise to multiple equilibria: a “good” equilibrium characterized by strong beliefs in cooperation, leading to high union density and low state regulation; and a “bad” equilibrium, characterized by distrustful labor relations, low union density and strong state regulation of the minimum wage. We then use surveys on social attitudes and unionization behavior to document that minimum wage legislation and union density do affect beliefs about the scope of cooperation in the labor market.

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Bibliographic Info

Paper provided by CEPREMAP in its series CEPREMAP Working Papers (Docweb) with number 0801.

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Length: 55 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:cpm:docweb:0801

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  1. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, American Economic Association, vol. 94(3), pages 526-556, June.
  2. Fernández, Raquel & Fogli, Alessandra, 2005. "Culture: An Empirical Investigation of Beliefs, Work and Fertility," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5089, C.E.P.R. Discussion Papers.
  3. Assar Lindbeck & Sten Nyberg & Jšrgen W. Weibull, 1999. "Social Norms And Economic Incentives In The Welfare State," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 114(1), pages 1-35, February.
  4. Booth, Alison L & Chatterji, Monojit, 1993. "Reputation, Membership and Wages in Open Shop Trade Union," Oxford Economic Papers, Oxford University Press, vol. 45(1), pages 23-41, January.
  5. Akerlof, George A, 1980. "A Theory of Social Custom, of Which Unemployment May be One Consequence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 94(4), pages 749-75, June.
  6. Naylor, Robin & Raaum, Oddbjorn, 1993. "The Open Shop Union, Wages, and Management Opposition," Oxford Economic Papers, Oxford University Press, vol. 45(4), pages 589-604, October.
  7. Naylor, R. & Cripps, M., 1991. "An Economic Theory of the Open Shop Trade Union," The Warwick Economics Research Paper Series (TWERPS) 372, University of Warwick, Department of Economics.
  8. David Naumark & William Wascher, 2003. "Minimum wages, labor market institutions, and youth employment: a cross-national analysis," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2003-23, Board of Governors of the Federal Reserve System (U.S.).
  9. Naylor, Robin, 1987. "Strikes, Free Riders and Social Customs," The Warwick Economics Research Paper Series (TWERPS) 275, University of Warwick, Department of Economics.
  10. Booth, Alison L, 1985. "The Free Rider Problem and a Social Custom Model of Trade Union Membership," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(1), pages 253-61, February.
  11. Corneo, Giacomo, 1995. "Social custom, management opposition, and trade union membership," European Economic Review, Elsevier, Elsevier, vol. 39(2), pages 275-292, February.
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Cited by:
  1. Philippe Askenazy & Eve Caroli & Jérôme Gautié, 2009. "Un panorama des bas salaires et de la qualité de l'emploi peu qualifié en France," PSE Working Papers halshs-00567693, HAL.
  2. repec:spo:wpecon:info:hdl:2441/8883 is not listed on IDEAS
  3. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2009. "Regulation and Distrust," NBER Working Papers 14648, National Bureau of Economic Research, Inc.
  4. Sanvi Avouyi-Dovi & Denis Fougère & Erwan Gautier, 2013. "Wage Rigidity, Collective Bargaining, and the Minimum Wage: Evidence from French Agreement Data," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1337-1351, October.
  5. repec:hal:wpaper:halshs-00564903 is not listed on IDEAS
  6. Gilbert Cette & Étienne Wasmer, 2010. "La revalorisation automatique du SMIC," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 139-159.
  7. Arnstein Aassve & Francesco Billari & Léa Pessin, 2012. "Trust and fertility dynamics," Working Papers, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi 055, "Carlo F. Dondena" Centre for Research on Social Dynamics (DONDENA), Università Commerciale Luigi Bocconi.
  8. Nathan Nunn & Leonard Wantchekon, 2011. "The Slave Trade and the Origins of Mistrust in Africa," American Economic Review, American Economic Association, American Economic Association, vol. 101(7), pages 3221-52, December.
  9. Thomas Breda, 2010. "Firms' rents, workers' bargaining power and the union wage premium in France," PSE Working Papers halshs-00564903, HAL.

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