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Can Policy Influence Culture? Minimum Wage and the Quality of Labor Relations

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  • Aghion, Philippe
  • Algan, Yann
  • Cahuc, Pierre

Abstract

Can public policy affect culture, such as beliefs and norms of cooperation? We investigate this question by evaluating how state regulation of minimum wage interacts with unionization behavior and social dialogue. International data shows a negative correlation between union density and the quality of labor relations on one hand, and state regulation of the minimum wage on the other hand. To explain this relation, we develop a model of learning of the quality of labor relations. State regulation crowds out the possibility for workers to experiment negotiation and learn about the true cooperative nature of participants in the labor market. This crowding out effect can give rise to multiple equilibria: a “good” equilibrium characterized by strong beliefs in cooperation, leading to high union density and low state regulation; and a “bad” equilibrium, characterized by distrustful labor relations, low union density and strong state regulation of the minimum wage. We then use surveys on social attitudes and unionization behavior to document that minimum wage legislation and union density do affect beliefs about the scope of cooperation in the labor market.

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  • Aghion, Philippe & Algan, Yann & Cahuc, Pierre, 2008. "Can Policy Influence Culture? Minimum Wage and the Quality of Labor Relations," CEPREMAP Working Papers (Docweb) 0801, CEPREMAP.
    • Handle: RePEc:cpm:docweb:0801
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    Cited by:

    1. Jérôme Gautié, 2010. "France: Towards the End of an Active Minimum Wage Policy?," Chapters,in: The Minimum Wage Revisited in the Enlarged EU, chapter 5 Edward Elgar Publishing.
    2. Nathan Nunn & Leonard Wantchekon, 2011. "The Slave Trade and the Origins of Mistrust in Africa," American Economic Review, American Economic Association, vol. 101(7), pages 3221-3252, December.
    3. repec:hal:cesptp:halshs-00567693 is not listed on IDEAS
    4. Thomas Breda, 2010. "Firms' rents, workers' bargaining power and the union wage premium in France," Working Papers halshs-00564903, HAL.

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