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Inducing political action by workers

Author

Listed:
  • Bruno De Borger

    () (Department of Economics, University of Antwerp, Prinsstraat 13, B-2000 Antwerp, Belgium)

  • Amihai Glazer

    () (Department of Economics, University of California at Irvine, Irvine, CA 92697, USA)

Abstract

A firm aiming to influence a governmental policy may benefit from political action by its stakeholders, such as workers. This article studies the behavior of such a firm, showing that workers will have a greater incentive to engage in costly political activity against the governmental policy the greater their number and the higher the wage. The firm may, therefore, profit from paying above-market wages and from hiring what might appear to be an inefficiently large number of workers. And because unions may overcome free-rider problems of uncoordinated political effort, a firm may favor unionization, or be less opposed to unionization than it would otherwise be. The results of this article can also explain why firms may little reduce wages in a recession, and why the higher wages paid by unionized firms do not reduce survival rates of these firms.

Suggested Citation

  • Bruno De Borger & Amihai Glazer, 2015. "Inducing political action by workers," Southern Economic Journal, Southern Economic Association, vol. 81(4), pages 1117-1144, April.
  • Handle: RePEc:sej:ancoec:v:81:4:y:2015:p:1117-1144
    DOI: 10.1002/soej.12046
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    File URL: http://dx.doi.org/10.1002/soej.12046
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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