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Parente and Prescott's Theory May Work in Practice But Does Not Work in Theory

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  • Cozzi Guido

    () (University of Rome “La Sapienza”)

  • Palacios Luis-Felipe

    () (lfp3@cornell.edu)

Abstract

In this paper we challenge Parente and Prescott's (1999) theoretical framework, which establishes that unions use their control of "work practices" to thwart the efficient use of technology in the firms. We argue instead that unions, despite endowing monopoly rights over a technology, should tend to impose its efficient use. In fact if union members care about labor disutility, along with wage incomes, they will dictate "work practices" consistent with operating technology at full efficiency, in order to allow workers to enjoy more leisure. Our result is more general than Parente and Prescott's and does not rely on the particular specification of preferences.

Suggested Citation

  • Cozzi Guido & Palacios Luis-Felipe, 2003. "Parente and Prescott's Theory May Work in Practice But Does Not Work in Theory," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-7, August.
  • Handle: RePEc:bpj:bejmac:v:contributions.3:y:2003:i:1:n:8
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    Cited by:

    1. Harold L. Cole & Lee E. Ohanian & Alvaro Riascos & James A. Schmitz, 2006. "Latin America in the rearview mirror," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Sep.
    2. Berthold Herrendorf & Arilton Teixeira, 2011. "Barriers To Entry And Development," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(2), pages 573-602, May.

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