Relative Consumption, Working Time, and Trade Unions
AbstractStatus considerations with respect to consumption give rise to negative externalities because individuals do not take into account that their decisions affect the relative consumption position of others. Further, status concerns create incentives for excessive labour supply in competitive markets. We show that trade unions which are unable to internalise the externality can nevertheless mitigate the resulting distortion. The reason is that wages above the market clearing level are only feasible if people work less and, therefore, fewer hours than in a competitive market. Accordingly, the theoretical model establishes that trade unions can have a welfare-enhancing role in a world with relative consumption effects.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7471.
Length: 33 pages
Date of creation: Jun 2013
Date of revision:
Publication status: published in: Labour Economics, 2013, 24, 170-179
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Other versions of this item:
- Goerke, Laszlo & Hillesheim, Inga, 2013. "Relative consumption, working time, and trade unions," Labour Economics, Elsevier, vol. 24(C), pages 170-179.
- Laszlo Goerke & Inga Hillesheim, 2013. "Relative Consumption, Working Time, and Trade Unions," CESifo Working Paper Series 4318, CESifo Group Munich.
- Inga Hillesheim & Laszlo Goerke, 2013. "Relative Consumption, Working Time, and Trade Unions," IAAEU Discussion Papers 201310, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
- D62 - Microeconomics - - Welfare Economics - - - Externalities
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
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