Behavioural Economics and Labour Law

Ewan McGaughey

King's College London – The Dickson Poon School of Law

June 30, 2014

LSE Legal Studies Working Paper No. 20/2014

Can behavioural economics help to make better labour law? This article traces the relationship between empirical work and legal thought, and focuses on new studies in behavioural economics and their potential implications for labour policy. Work by behavioural economists, and its implications, is discussed in four main fields of labour law policy: the effect of fair pay on the motivation to work; the effect of security in pay, and potentially job security, on productivity; the relevance of participation rights and job satisfaction in the workplace; and the differences between opting in and opting out of workplace schemes such as occupational pensions. Studies on these questions provide evidence that labour rights which correct inequality of bargaining power, protect security in pay and conditions and promote workplace participation redress significant market failures. If the thinking is careful and slow, behavioural economics seems indispensable to make better labour law.

Number of Pages in PDF File: 37

Keywords: Behavioural economics, labour law, pensions, fairness, productivity, efficiency, nudge, rights, Coase

JEL Classification: D23, H30, J26, K31

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Date posted: July 16, 2014 ; Last revised: November 3, 2014

Suggested Citation

McGaughey, Ewan, Behavioural Economics and Labour Law (June 30, 2014). LSE Legal Studies Working Paper No. 20/2014. Available at SSRN: http://ssrn.com/abstract=2460685 or http://dx.doi.org/10.2139/ssrn.2460685

Contact Information

Ewan McGaughey (Contact Author)
King's College London – The Dickson Poon School of Law ( email )
Somerset House East Wing
London, WC2R 2LS
United Kingdom
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