Behavioural Economics and Labour Law

Shorter version in A Ludlow and A Blackham, New Frontiers in Empirical Labour Law Research (2015) ch 6

LSE Legal Studies Working Paper No. 20/2014

King's College London Law School Research Paper No. 2015-04

38 Pages Posted: 16 Jul 2014 Last revised: 22 Dec 2015

Ewan McGaughey

King's College London - School of Law

Date Written: June 30, 2014

Abstract

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.

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

JEL Classification: D23, H30, J26, K31

Suggested Citation

McGaughey, Ewan, Behavioural Economics and Labour Law (June 30, 2014). Shorter version in A Ludlow and A Blackham, New Frontiers in Empirical Labour Law Research (2015) ch 6 ; LSE Legal Studies Working Paper No. 20/2014; King's College London Law School Research Paper No. 2015-04. Available at SSRN: https://ssrn.com/abstract=2460685 or http://dx.doi.org/10.2139/ssrn.2460685

Ewan McGaughey (Contact Author)

King's College London - School of Law ( email )

Somerset House East Wing
Strand
London, WC2R 2LS
United Kingdom

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