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Value of Work: Bargaining, job-satisfaction, and taxation in a simple GE model

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  • Felix R. FitzRoy
  • Michael A. Nolan

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.
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Suggested Citation

  • Felix R. FitzRoy & Michael A. Nolan, 2005. "Value of Work: Bargaining, job-satisfaction, and taxation in a simple GE model," Discussion Paper Series, Department of Economics 200515, Department of Economics, University of St. Andrews.
  • Handle: RePEc:san:wpecon:0515
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    File URL: http://www.st-andrews.ac.uk/~wwwecon/papers/dp0515.pdf
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    References listed on IDEAS

    as
    1. Freeman, Richard B, 1978. "Job Satisfaction as an Economic Variable," American Economic Review, American Economic Association, vol. 68(2), pages 135-141, May.
    2. Addison, John T., 2005. "The Determinants of Firm Performance: Unions, Works Councils, and Employee Involvement/High Performance Work Practices," IZA Discussion Papers 1620, Institute for the Study of Labor (IZA).
    3. Felix FitzRoy & Kornelius Kraft, 2005. "Co-determination, Efficiency and Productivity," British Journal of Industrial Relations, London School of Economics, vol. 43(2), pages 233-247, June.
    4. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398.
    5. Clark, Andrew E. & Oswald, Andrew J., 1996. "Satisfaction and comparison income," Journal of Public Economics, Elsevier, vol. 61(3), pages 359-381, September.
    6. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, January.
    7. Winkelmann, Liliana & Winkelmann, Rainer, 1998. "Why Are the Unemployed So Unhappy? Evidence from Panel Data," Economica, London School of Economics and Political Science, vol. 65(257), pages 1-15, February.
    8. Clark, Andrew E., 1997. "Job satisfaction and gender: Why are women so happy at work?," Labour Economics, Elsevier, vol. 4(4), pages 341-372, December.
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    More about this item

    Keywords

    Job-satisfaction; bargaining; unemployment; taxation.;

    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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