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Inducing political action by workers

Listed author(s):
  • 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)

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.

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File URL: http://dx.doi.org/10.1002/soej.12046
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Article provided by Southern Economic Association in its journal Southern Economic Journal.

Volume (Year): 81 (2015)
Issue (Month): 4 (April)
Pages: 1117-1144

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Handle: RePEc:sej:ancoec:v:81:4:y:2015:p:1117-1144
Contact details of provider: Web page: http://www.southerneconomic.org/

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