‘Living’ Wage, Class Conflict and Ethnic Strife
AbstractWe 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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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3631.
Length: 23 pages
Date of creation: Aug 2008
Date of revision:
Publication status: published in: Journal of Economic Behavior and Organization, 2009, 72 (2), 750-765
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Other versions of this item:
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
- I38 - Health, Education, and Welfare - - Welfare, Well-Being, 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-08-14 (All new papers)
- NEP-LAB-2008-08-14 (Labour Economics)
- NEP-MIG-2008-08-14 (Economics of Human Migration)
- NEP-POL-2008-08-14 (Positive Political Economics)
- NEP-REG-2008-08-14 (Regulation)
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