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

Cozzi, G. and Palacios, L.-P. (2003) 'Parente and Prescott’s theory may work in practice but does not work in theory.', B.E. journal of macroeconomics., 3 (1).


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.

Item Type:Article
Keywords:Trade unions, Inefficiency, Technological change, Institutions and growth.
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Publisher statement:Copyright © 2003 by the authors. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher, bepress, which has been given certain exclusive rights by the author. Contributions to Macroeconomics is produced by The Berkeley Electronic Press (bepress).
Record Created:02 Mar 2010 17:05
Last Modified:13 Dec 2011 14:20

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