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Coercion, Obnoxious Tasks, and Economic Efficiency

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  • Soham Baksi
  • Pinaki Bose
  • Marc T. Law

Abstract

Incomplete contracts and inadequate enforcement of labor rights, together with the asymmetry of power between a worker and her employer, create an environment where the employer can forcibly extract additional services (e.g. unpaid overtime or sexual favors) from the worker beyond the mutually agreed terms of exchange. We show that coercive impositions can co-exist with voluntary transactions in the labour market, and that a positive incidence of coercion can adversely affect the efficiency of the corresponding market transactions. This may justify banning the legal market for the additional service if it is regarded as "obnoxious" by society.

Suggested Citation

  • Soham Baksi & Pinaki Bose & Marc T. Law, 2020. "Coercion, Obnoxious Tasks, and Economic Efficiency," Departmental Working Papers 2020-01, The University of Winnipeg, Department of Economics.
  • Handle: RePEc:win:winwop:2020-01
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis

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