 THE BROTHER-IN-LAW EFFECTDavid Levine, Federico Weinschelbaum and Felipe Zurita International Economic Review, 2010, vol. 51, issue 2, 497-507 Abstract: When a firm is forced to pay abnormally high wages, hiring transfers rents. This effectively endows the employer with the ability to grant favors, and he may wish to do so even at some cost to efficient production. We refer to this as the "brother-in-law effect". This article analyzes its consequences. When the brother-in-law effect is due to unionization, decisions regarding both the number and type of workers employed could be inefficient; overemployment could obtain even relative to the workforce that would be employed without unionization. We also identify cases in which nepotism improves efficiency. Copyright (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association. Date: 2010 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:51:y:2010:i:2:p:497-507 Ordering information: This journal article can be ordered from Access Statistics for this article International Economic Review is currently edited by Harold L. Cole More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC. |
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