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Value of Work: Bargaining, Job-Satisfaction, and Taxation in a Simple GE Model

Author

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  • FitzRoy, Felix

    (University of St. Andrews)

  • Nolan, Michael A.

    (University of Hull)

Abstract

Job-satisfaction as a component of workers' utility has been strangely neglected, with work usually regarded as reducing utility and the benefits of leisure. This is contradicted by many empirical studies showing that unemployment is a major cause of unhappiness, even when income is controlled for. Here we develop a simple model where job-satisfaction is non-contractible but can be included in extended collective bargaining when workers participate in management, but employment is still chosen to maximise profit. Including taxation to fund unemployment benefits and public goods, we show that switching from traditional bargaining over wages to extended (but still second-best) bargaining can generate a Pareto welfare improvement.

Suggested Citation

  • FitzRoy, Felix & Nolan, Michael A., 2005. "Value of Work: Bargaining, Job-Satisfaction, and Taxation in a Simple GE Model," IZA Discussion Papers 1760, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp1760
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
    • J52 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Dispute Resolution: Strikes, Arbitration, and Mediation
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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