IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp3680.html
   My bibliography  Save this paper

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

Author

Listed:
  • Aghion, Philippe

    (LSE)

  • Algan, Yann

    (Sciences Po, Paris)

  • Cahuc, Pierre

    (Sciences Po, Paris)

Abstract

Can public policy interfere with culture, such as beliefs and norms of cooperation? We investigate his question by evaluating the interactions between the State and the Civil Society, focusing on the labor market. 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 the relation between minimum wage legislation and the beliefs about the scope of cooperation in the labor market.

Suggested Citation

  • Aghion, Philippe & Algan, Yann & Cahuc, Pierre, 2008. "Can Policy Interact with Culture? Minimum Wage and the Quality of Labor Relations," IZA Discussion Papers 3680, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3680
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp3680.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Assar Lindbeck & Sten Nyberg & Jörgen W. Weibull, 1999. "Social Norms and Economic Incentives in the Welfare State," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(1), pages 1-35.
    2. Stephen Knack & Philip Keefer, 1997. "Does Social Capital Have an Economic Payoff? A Cross-Country Investigation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(4), pages 1251-1288.
    3. Roland Bénabou & Jean Tirole, 2006. "Belief in a Just World and Redistributive Politics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 699-746.
    4. Alberto Alesina & George-Marios Angeletos, 2005. "Fairness and Redistribution," American Economic Review, American Economic Association, vol. 95(4), pages 960-980, September.
    5. Yann Algan & Pierre Cahuc, 2007. "Social Attitudes and Economic Development : an Epidemiological Approach," SciencePo Working papers Main hal-01066088, HAL.
    6. David Neumark & William L. Wascher, 2008. "Minimum Wages," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262141027, December.
    7. Assar Lindbeck & Sten Nyberg, 2006. "Raising Children to Work Hard: Altruism, Work Norms, and Social Insurance," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1473-1503.
    8. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2007. "Social Capital as Good Culture," NBER Working Papers 13712, National Bureau of Economic Research, Inc.
    9. La Porta, Rafael, et al, 1997. "Trust in Large Organizations," American Economic Review, American Economic Association, vol. 87(2), pages 333-338, May.
    10. Naylor, Robin & Cripps, Martin, 1993. "An economic theory of the open shop trade union," European Economic Review, Elsevier, vol. 37(8), pages 1599-1620, December.
    11. David Neumark & William Wascher, 2004. "Minimum Wages, Labor Market Institutions, and Youth Employment: A Cross-National Analysis," ILR Review, Cornell University, ILR School, vol. 57(2), pages 223-248, January.
    12. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2004. "The Role of Social Capital in Financial Development," American Economic Review, American Economic Association, vol. 94(3), pages 526-556, June.
    13. Guido Tabellini, 2010. "Culture and Institutions: Economic Development in the Regions of Europe," Journal of the European Economic Association, European Economic Association, vol. 8(4), pages 677-716, June.
    14. 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.
    15. Alessandra Fogli & Raquel Fernandez, 2009. "Culture: An Empirical Investigation of Beliefs, Work, and Fertility," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 146-177, January.
    16. Daniele Checchi & Jelle Visser, 2002. "Pattern persistence in european trade union density," Departmental Working Papers 2002-01, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    17. repec:hal:spmain:info:hdl:2441/8814 is not listed on IDEAS
    18. George A. Akerlof, 1980. "A Theory of Social Custom, of which Unemployment may be One Consequence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 94(4), pages 749-775.
    19. Bisin, Alberto & Verdier, Thierry, 2001. "The Economics of Cultural Transmission and the Dynamics of Preferences," Journal of Economic Theory, Elsevier, vol. 97(2), pages 298-319, April.
    20. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1015-1049.
    21. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2006. "Does Culture Affect Economic Outcomes?," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 23-48, Spring.
    22. Luigi Guiso & Paola Sapienza & Luigi Zingales, 2016. "Long-Term Persistence," Journal of the European Economic Association, European Economic Association, vol. 14(6), pages 1401-1436, December.
    23. Thomas Piketty, 1995. "Social Mobility and Redistributive Politics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(3), pages 551-584.
    24. Pierre Cahuc & Yann Algan, 2009. "Civic Virtue and Labor Market Institutions," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 111-145, January.
    25. Stephen Nickell & Luca Nunziata & Wolfgang Ochel & Glenda Quintini, 2001. "The Beveridge Curve, Unemployment and Wages in the OECD from the 1960s to the 1990s - Preliminary Version," CEP Discussion Papers dp0502, Centre for Economic Performance, LSE.
    26. 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.
    27. Alison L. Booth, 1985. "The Free Rider Problem and a Social Custom Model of Trade Union Membership," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(1), pages 253-261.
    28. Corneo, Giacomo, 1995. "Social custom, management opposition, and trade union membership," European Economic Review, Elsevier, vol. 39(2), pages 275-292, February.
    29. repec:hal:wpspec:info:hdl:2441/8813 is not listed on IDEAS
    30. Herwig Immervoll, 2007. "Minimum Wages, Minimum Labour Costs and the Tax Treatment of Low-Wage Employment," OECD Social, Employment and Migration Working Papers 46, OECD Publishing.
    31. repec:hal:wpspec:info:hdl:2441/8814 is not listed on IDEAS
    32. Robin Naylor, 1989. "Strikes, Free Riders, and Social Customs," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(4), pages 771-785.
    33. repec:hal:spmain:info:hdl:2441/8813 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. [経済]保守派は組合を支持すべし
      by himaginary in himaginaryの日記 on 2012-11-26 14:00:00
    2. Unions vs legislation
      by chris dillow in Stumbling and Mumbling on 2011-12-10 18:27:47
    3. Conservatives - support unions!
      by chris dillow in Stumbling and Mumbling on 2012-09-10 18:14:15
    4. Neoliberalism's unintended consequences
      by ? in Stumbling and Mumbling on 2013-09-25 16:18:00
    5. Unions & productivity
      by ? in Stumbling and Mumbling on 2014-07-11 17:42:00
    6. Fairness, decentralization & capitalism
      by chris in Stumbling and Mumbling on 2015-08-15 17:47:41
    7. Inequality against freedom
      by chris in Stumbling and Mumbling on 2016-02-23 19:22:59
    8. Free markets need equality
      by chris in Stumbling and Mumbling on 2017-06-21 17:34:04
    9. The minimum wage dilemma
      by chris in Stumbling and Mumbling on 2021-09-28 13:29:01

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. LIU Yang & HAGIWARA Risa, 2020. "Labor Force Participation of Married Female Immigrants: Evidence from a Low Female-LFPR Host Country," Discussion papers 20019, Research Institute of Economy, Trade and Industry (RIETI).
    2. Blake, Hélène & Sangnier, Marc, 2011. "Senior activity rate, retirement incentives, and labor relations," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 5, pages 1-32.
    3. Thomas Breda, 2010. "Firms' rents, workers' bargaining power and the union wage premium in France," Working Papers halshs-00564903, HAL.
    4. Jean-Baptiste Michau, 2013. "Unemployment Insurance And Cultural Transmission: Theory And Application To European Unemployment," Journal of the European Economic Association, European Economic Association, vol. 11(6), pages 1320-1347, December.
    5. Bernhard Boockmann, 2010. "The Combined Employment Effects of Minimum Wages and Labor Market Regulation—a Meta-Analysis," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 61(Supplemen), pages 167-188.
    6. Bauernschuster, Stefan & Falck, Oliver & Heblich, Stephan, 2010. "Social capital access and entrepreneurship," Journal of Economic Behavior & Organization, Elsevier, vol. 76(3), pages 821-833, December.
    7. Giavazzi, Francesco & Schiantarelli, Fabio & Serafinelli, Michel, 2009. "Culture, Policies and Labor Market Outcomes," CEPR Discussion Papers 7536, C.E.P.R. Discussion Papers.
    8. Pierre Cahuc & Yann Algan, 2009. "Civic Virtue and Labor Market Institutions," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 111-145, January.
    9. Gaston, Noel & Rajaguru, Gulasekaran, 2013. "International migration and the welfare state revisited," European Journal of Political Economy, Elsevier, vol. 29(C), pages 90-101.
    10. repec:dau:papers:123456789/11159 is not listed on IDEAS
    11. Dan Andrews & Aida Caldera Sánchez & Åsa Johansson, 2011. "Towards a Better Understanding of the Informal Economy," OECD Economics Department Working Papers 873, OECD Publishing.
    12. Nathan Nunn & Leonard Wantchekon, 2011. "The Slave Trade and the Origins of Mistrust in Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3221-3252, December.
    13. Anna Lukiyanova & Nina Vishnevskaya, 2015. "The Decentralization of Minimum Wage Setting in Russia Economies," HSE Working papers WP BRP 90/EC/2015, National Research University Higher School of Economics.
    14. repec:hal:spmain:info:hdl:2441/8812 is not listed on IDEAS
    15. Eugenia Fotoniata & Thomas Moutos, 2010. "Greece: Neglect and Resurgence of Minimum Wage Policy," Chapters, in: Daniel Vaughan-Whitehead (ed.), The Minimum Wage Revisited in the Enlarged EU, chapter 7, Edward Elgar Publishing.
    16. van Ypersele, Tanguy & Francois, Patrick, 2009. "Doux Commerces: Does Market Competition Cause Trust?," CEPR Discussion Papers 7368, C.E.P.R. Discussion Papers.
    17. Noel Gaston & Gulasekaran Rajaguru, 2013. "International migration and the welfare state: Asian perspectives," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 18(2), pages 271-289.
    18. Fernández, Raquel, 2010. "Does Culture Matter?," CEPR Discussion Papers 7965, C.E.P.R. Discussion Papers.
    19. Amy Peng & Louis N. Christofides, 2009. "Real Wage Chronology," Working Papers 011, Ryerson University, Department of Economics.
    20. Paolo Pinotti, 2009. "Trust and Regulation: Addressing a Cultural Bias," Temi di discussione (Economic working papers) 721, Bank of Italy, Economic Research and International Relations Area.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. repec:hal:spmain:info:hdl:2441/8882 is not listed on IDEAS
    2. Philippe Aghion & Yann Algan & Pierre Cahuc, 2008. "Can Policy Interact with Culture? Minimum Wage and the Quality of Labor Relations," Working Papers hal-00972820, HAL.
    3. repec:hal:wpspec:info:hdl:2441/8882 is not listed on IDEAS
    4. Philippe Aghion & Yann Algan & Pierre Cahuc, 2011. "Civil Society And The State: The Interplay Between Cooperation And Minimum Wage Regulation," Journal of the European Economic Association, European Economic Association, vol. 9(1), pages 3-42, February.
    5. repec:spo:wpecon:info:hdl:2441/8882 is not listed on IDEAS
    6. Aghion, Philippe & Algan, Yann & Cahuc, Pierre, 2008. "Can Policy Influence Culture? Minimum Wage and the Quality of Labor Relations," CEPREMAP Working Papers (Docweb) 0801, CEPREMAP.
    7. Algan, Yann & Cahuc, Pierre, 2014. "Trust, Growth, and Well-Being: New Evidence and Policy Implications," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 2, pages 49-120, Elsevier.
    8. Guido Tabellini, 2007. "Institutions and Culture," Working Papers 330, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    9. Philippe Aghion & Yann Algan & Pierre Cahuc & Andrei Shleifer, 2010. "Regulation and Distrust," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 125(3), pages 1015-1049.
    10. repec:hal:spmain:info:hdl:2441/4km7l02j139aj8hl7kcccmqk9s is not listed on IDEAS
    11. Xu, Xu & Jin, Xin, 2018. "The autocratic roots of social distrust," Journal of Comparative Economics, Elsevier, vol. 46(1), pages 362-380.
    12. repec:hal:spmain:info:hdl:2441/8883 is not listed on IDEAS
    13. Yann Algan & Clément Malgouyres & Thierry Mayer & Mathias Thoenig, 2022. "The Economic Incentives of Cultural Transmission: Spatial Evidence from Naming Patterns Across France," The Economic Journal, Royal Economic Society, vol. 132(642), pages 437-470.
    14. Guido Tabellini, 2008. "The Scope of Cooperation: Values and Incentives," The Quarterly Journal of Economics, Oxford University Press, vol. 123(3), pages 905-950.
    15. Alberto Alesina & Yann Algan & Pierre Cahuc & Paola Giuliano, 2015. "Family Values And The Regulation Of Labor," Journal of the European Economic Association, European Economic Association, vol. 13(4), pages 599-630, August.
    16. Sangnier, Marc, 2013. "Does trust favor macroeconomic stability?," Journal of Comparative Economics, Elsevier, vol. 41(3), pages 653-668.
    17. Corrado Giulietti & Enrico Rettore & Sara Tonini, 2023. "The chips are down: the influence of family on children’s trust formation," Journal of Population Economics, Springer;European Society for Population Economics, vol. 36(1), pages 211-233, January.
    18. Francesco Giavazzi & Ivan Petkov & Fabio Schiantarelli, 2019. "Culture: persistence and evolution," Journal of Economic Growth, Springer, vol. 24(2), pages 117-154, June.
    19. Alberto Bisin & Thierry Verdier, 2010. "The Economics of Cultural Transmission and Socialization," Post-Print halshs-00754788, HAL.
    20. repec:hal:spmain:info:hdl:2441/h23tra6lt8ora7hjg2kqou65h is not listed on IDEAS
    21. A. Ricci & S. Scicchitano & M. Conti & G. Cardullo & G. Sulis, 2022. "On the Emergence of Cooperative Industrial and Labor Relations," Working Paper CRENoS 202201, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    22. Yann Algan & Pierre Cahuc, 2014. "Trust, Well-Being and Growth: New Evidence and Policy Implications," Post-Print hal-01169659, HAL.
    23. Jean-Baptiste Michau, 2013. "Unemployment Insurance And Cultural Transmission: Theory And Application To European Unemployment," Journal of the European Economic Association, European Economic Association, vol. 11(6), pages 1320-1347, December.
    24. Paolo Pinotti, 2009. "Trust and Regulation: Addressing a Cultural Bias," Temi di discussione (Economic working papers) 721, Bank of Italy, Economic Research and International Relations Area.
    25. repec:hal:spmain:info:hdl:2441/33o86cn6qp83dot08iir97915s is not listed on IDEAS
    26. repec:hal:spmain:info:hdl:2441/20g3idj0jd9iqosvjjdcbu44lu is not listed on IDEAS
    27. Durante, Ruben, 2009. "Risk, Cooperation and the Economic Origins of Social Trust: an Empirical Investigation," MPRA Paper 25887, University Library of Munich, Germany.
    28. Koji Asano, 2022. "Trust and Law in Credit Markets," Economica, London School of Economics and Political Science, vol. 89(354), pages 332-361, April.

    More about this item

    Keywords

    trade unions; quality of labor relations; social capital; minimum wage;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • K00 - Law and Economics - - General - - - General (including Data Sources and Description)

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp3680. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.