Parente and Prescott’s Theory may work in practice but does not work in theory

Cozzi, G.; Palacios, L.-P.

Abstract

In this paper we challenge Parente and Prescott's (1999) theoretical framework, which establishes that unions use their control of "work practices" to thwart the efficient use of technology in the firms. We argue instead that unions, despite endowing monopoly rights over a technology, should tend to impose its efficient use. In fact if union members care about labor disutility, along with wage incomes, they will dictate "work practices" consistent with operating technology at full efficiency, in order to allow workers to enjoy more leisure. Our result is more general than Parente and Prescott's and does not rely on the particular specification of preferences.

Citation

Cozzi, G., & Palacios, L. (2003). Parente and Prescott’s Theory may work in practice but does not work in theory. BE Journal of Macroeconomics, 3(1), https://doi.org/10.2202/1534-6005.1116

• Journal Article Type: Article
• Online Publication Date: Jan 29, 2010
• Publication Date: Mar 29, 2003
• Deposit Date: Mar 2, 2010
• Publicly Available Date: Mar 3, 2010
• Journal: BE Journal of Macroeconomics
• Publisher: De Gruyter
• Peer Reviewed: Peer Reviewed
• Volume: 3
• Issue: 1
• DOI: https://doi.org/10.2202/1534-6005.1116
• Keywords: Trade unions, Inefficiency, Technological change, Institutions and growth.
• Public URL: https://durham-repository.worktribe.com/output/1523491
• Publisher URL: http://www.bepress.com/bejm/contributions/vol3/iss1/art8/