TY  - JOUR
AU  - Aghion,Philippe
AU  - Algan,Yann
AU  - Cahuc,Pierre
TI  - Can Policy Interact with Culture? Minimum Wage and the Quality of Labor Relations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14327
PY  - 2008
Y2  - September 2008
UR  - http://www.nber.org/papers/w14327
L1  - http://www.nber.org/papers/w14327.pdf
N1  - Author contact info:
Philippe Aghion
Department of Economics
Harvard University
1805 Cambridge St
Cambridge, MA 02138
Tel: 617/495-6675
Fax: 617/495-4341
E-Mail: paghion@fas.harvard.edu

Yann Algan
Department of Economics
Sciences Po
75007 Paris, France
28 rue des Saints-Pères 75007 Paris
France
E-Mail: yann.algan@sciences-po.org

Pïerre Cahuc
CREST, Ecole  Polytechnique
15 boulevard Gabriel Peri
92245 Malakoff Cedex, France
Tel: (33)1 41 17 37 17
E-Mail: cahuc@ensae.fr
AB  - Can public policy interfere with culture, such as beliefs and norms of cooperation? We investigate this question by evaluating the interactions between the State and the Civil Society, focusing on the labor market. International data shows a negative correlation between union density and the quality of labor relations on one hand, and state regulation of the minimum wage on the other hand. To explain this relation, we develop a model of learning of the quality of labor relations. State regulation crowds out the possibility for workers to experiment negotiation and learn about the true cooperative nature of participants in the labor market. This crowding out effect can give rise to multiple equilibria: a "good" equilibrium characterized by strong beliefs in cooperation, leading to high union density and low state regulation; and a "bad" equilibrium, characterized by distrustful labor relations, low union density and strong state regulation of the minimum wage. We then use surveys on social attitudes and unionization behavior to document the relation between minimum wage legislation and the beliefs about the scope of cooperation in the labor market.
ER  -