The Effect of the Initial Distribution of Labor-Related Property Rights on the Allocative Efficiency of Labor Markets
37 Pages Posted: 23 Jan 2023
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The Effect of the Initial Distribution of Labor-Related Property Rights on the Allocative Efficiency of Labor Markets
The Effect of the Initial Distribution of Labor-Related Property Rights on the Allocative Efficiency of Labor Markets
Date Written: January 19, 2023
Abstract
We conduct an empirical study to examine the impact of the initial distribution of labor-related property rights on the allocative efficiency of labor markets for skilled workers in a highly competitive labor market (professional basketball). Specifically, we compare a regime where employers can trade workers to other employers without the worker's consent to one where workers have the right to negotiate freely with other employers and move without their employer's consent. Our results indicate that contrary to the predictions of the Coase Theorem, allocative efficiency decreases when workers have the initial right to negotiate freely and move to another employer.
Keywords: Coase theorem, labor market, allocative efficiency, productivity, sports as a lab
JEL Classification: E24, J01, J21, L83
Suggested Citation: Suggested Citation