Value of Work: Bargaining, Job-Satisfaction, and Taxation in a Simple Ge Model

29 Pages Posted: 15 Oct 2005

See all articles by Felix R. Fitzroy

Felix R. Fitzroy

University of St. Andrews; IZA Institute of Labor Economics

Michael A. Nolan

University of Hull - Department of Economics

Date Written: September 2005

Abstract

Job-satisfaction as a component of workers' utility has been strangely neglected, with work usually regarded as reducing utility and the benefits of leisure. This is contradicted by many empirical studies showing that unemployment is a major cause of unhappiness, even when income is controlled for. Here we develop a simple model where job-satisfaction is non-contractible but can be included in extended collective bargaining when workers participate in management, but employment is still chosen to maximise profit. Including taxation to fund unemployment benefits and public goods, we show that switching from traditional bargaining over wages to extended (but still second-best) bargaining can generate a Pareto welfare improvement.

Keywords: job-satisfaction, bargaining, unemployment

JEL Classification: J28, J52, J65

Suggested Citation

Fitzroy, Felix R. and Nolan, Michael A., Value of Work: Bargaining, Job-Satisfaction, and Taxation in a Simple Ge Model (September 2005). IZA Discussion Paper No. 1760, Available at SSRN: https://ssrn.com/abstract=822870 or http://dx.doi.org/10.2139/ssrn.822870

Felix R. Fitzroy (Contact Author)

University of St. Andrews ( email )

St Salvator's College
St Andrews, Fife, KY16 9AJ
United Kingdom
+44 1334 462437 (Phone)
+44 1334 462444 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael A. Nolan

University of Hull - Department of Economics ( email )

Cottingham Road
Hull HU6 7RX, Great Britain
United Kingdom

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