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Inducing political action by workers

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  • Bruno De Borger
  • Amihai Glazer

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, John Wiley & Sons, vol. 81(4), pages 1117-1144, April.
    • Handle: RePEc:wly:soecon:v:81:y:2015:i:4:p:1117-1144
    DOI: 10.1002/soej.12046
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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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