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‘Living’ Wage, Class Conflict and Ethnic Strife

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Author Info
Dasgupta, Indraneel () (University of Durham)

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Abstract

We examine how group-specific differences in reservation wage, arising due to asymmetries in social entitlements, impact on distribution via the joint determination of class conflict between workers and employers, and ‘ethnic’ conflict among workers. We model a two-dimensional contest, where two unions, representing different sections of workers, jointly but non-cooperatively invest resources against employers in enforcing an exogenously given rent, while also contesting one another. The rent arises from a ‘living’ wage, set above reservation wage rates via labour regulations. We show that high reservation wage workers gain, and employers lose, from better social entitlements for low reservation wage workers. The latter however benefit, with employers and against the former, from weak labour regulations. When minority/immigrant workers are marginalized both in the labour market and in non-wage entitlements, improving job access and expanding ‘social support’ has contradictory effects on class and ethnic conflicts. ‘Trade unionism’, i.e. political articulation of shared economic interests alone, appears insufficient to temper ethnic conflicts among workers.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3631.

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Length: 23 pages
Date of creation: Aug 2008
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Handle: RePEc:iza:izadps:dp3631

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Related research
Keywords: class conflict; ethnic conflict; living wage; labour regulation; social entitlement; affirmative action; Distribution;

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Find related papers by JEL classification:
D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior
D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
I38 - Health, Education, and Welfare - - Welfare and Poverty - - - Government Programs; Provision and Effects of Welfare Programs
J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements

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  1. John E. Roemer, 1979. "Divide and Conquer: Microfoundations of a Marxian Theory of Wage Discrimination," Bell Journal of Economics, The RAND Corporation, vol. 10(2), pages 695-705, Autumn. [Downloadable!] (restricted)
  2. Woojin Lee & John E. Roemer, 2005. "The Rise and Fall of Unionised Labour Markets: A Political Economy Approach," Economic Journal, Royal Economic Society, vol. 115(500), pages 28-67, 01. [Downloadable!] (restricted)
  3. Garfinkel, Michelle R. & Skaperdas, Stergios, 2007. "Economics of Conflict: An Overview," Handbook of Defense Economics, Elsevier. [Downloadable!] (restricted)
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  4. Indraneel Dasgupta & Ravi Kanbur, 2005. "Community and anti-poverty targeting," Journal of Economic Inequality, Springer, vol. 3(3), pages 281-302, December. [Downloadable!] (restricted)
  5. Katz, Eliakim & Tokatlidu, Julia, 1996. "Group competition for rents," European Journal of Political Economy, Elsevier, vol. 12(4), pages 599-607, December. [Downloadable!] (restricted)
  6. Woojin Lee & John Roemer & Karine van der Straeten, 2005. "Racism, xenophobia, and redistribution," Working Papers 2005-15, University of Massachusetts Amherst, Department of Economics. [Downloadable!]
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  7. Skaperdas, Stergios, 1996. "Contest Success Functions," Economic Theory, Springer, vol. 7(2), pages 283-90, February.
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  8. Dasgupta, Indraneel & Kanbur, Ravi, 2007. "Community and class antagonism," Journal of Public Economics, Elsevier, vol. 91(9), pages 1816-1842, September. [Downloadable!] (restricted)
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  9. Glazer, Amihai, 2002. "Allies as rivals: internal and external rent seeking," Journal of Economic Behavior & Organization, Elsevier, vol. 48(2), pages 155-162, June. [Downloadable!] (restricted)
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