Relative Consumption, Working Time, and Trade Unions

Laszlo Goerke and Inga Hillesheim ()
Additional contact information
Inga Hillesheim: IHK Berlin

No 7471, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Status considerations with respect to consumption give rise to negative externalities because individuals do not take into account that their decisions affect the relative consumption position of others. Further, status concerns create incentives for excessive labour supply in competitive markets. We show that trade unions which are unable to internalise the externality can nevertheless mitigate the resulting distortion. The reason is that wages above the market clearing level are only feasible if people work less and, therefore, fewer hours than in a competitive market. Accordingly, the theoretical model establishes that trade unions can have a welfare-enhancing role in a world with relative consumption effects.

Keywords: relative consumption; hours of work; trade union; externality (search for similar items in EconPapers)
JEL-codes: D62 J22 J51 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013-06
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Citations: View citations in EconPapers (21)

Published - published in: Labour Economics, 2013, 24, 170-179

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Related works:
Journal Article: Relative consumption, working time, and trade unions (2013)
Working Paper: Relative Consumption, Working Time, and Trade Unions (2013)
Working Paper: Relative Consumption, Working Time, and Trade Unions (2013)
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