Tuesday, 4 September 2012

How trade unions increase welfare

an article by Alejandro Donado and Klaus Wa¨lde (University of Würzburg University of Mainz, Université Catholique de Louvain and CESifo) published in The Economic Journal Volume 122 Issue 563 (September 2012)


Historically, worker movements have played a crucial role in making workplaces safer. Firms traditionally oppose better health standards.

According to our interpretation, workplace safety is costly for firms but increases the average health of workers and thereby the aggregate labour supply.

A laissez faire approach in which firms set safety standards is suboptimal as workers are not fully informed of health risks associated with jobs. Safety standards set by better informed trade unions are output and welfare increasing.

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