Study Guides (380,000)
CA (150,000)
UW (6,000)
PSCI (50)

PSCI 255 Final: Discussion &Review 3

Political Science
Course Code
Jingjing Huo
Study Guide

This preview shows pages 1-2. to view the full 7 pages of the document.
PSCI255 Discussion and Review (3)
1. What is collective action failure? What is the solution to this problem? Use wage
restraint as an example
Collective action failure requires two necessary conditions:
o You need everyone to contribute for the outcome to work, therefore
each individual contribution is miniscule in the total outcome
o Access to the outcome (public good) cannot be denied, even for people
who are not contributing
Rational fool & free riding it’s ore ratioal to free ride, ad ot otriute,
while still reaping the benefits
Reducing free riding can be done by reducing the total number of total
otriutors therefore akig a idiidual’s free ridig ore ostl
If collective action is needed, but access to the outcome can be denied to those
not contributing, it is not considered collective action failure
o E.g. working in a large team environment: not showing up for work, or
not working as hard will still result in a finished product, but you may get
Wage restraint is a public good, because (1) it results in stronger economic
growth and (2) most workers need to exercise wage restraint for it to work
o Low centralization of workers results in high wage demands, because the
individual contribution of a lower wage for that union is insignificant to
the total economic growth this results in unions free riding on each
o In a highly centralized economy, free riding becomes impossible because
each contribution is much more significant to the total outcome this
results in wage restraint
2. Wage bargaining can be centralized or decentralized. What type of bargaining leads
to the highest unemployment?
Centralized bargaining
o One main player (Scandinavian countries) in one bargaining round
o Union is unable to free ride, resulting in a lower wage and higher wage
o This leads to low levels of unemployment
Moderately centralized bargaining
o Small number of players (Central Europe) in several bargaining rounds
o Unions are able to free ride off each other, resulting in a higher wage and
lower wage restraint
o This leads to high levels of unemployment due to the high wages
demanded by workers/unions
Decentralized bargaining
find more resources at
find more resources at

Only pages 1-2 are available for preview. Some parts have been intentionally blurred.

o Thousands of players (Anglo-Saxon Countries) in hundreds of thousands
of bargaining rounds, depending on firm
o Unions are very likely to free ride off each other, pushing for high wages
o Because of the high number of unions, they have no real bargaining
power (strikes are not a big worry for employers, because firms can
simply fire these workers and hire new workers willing to work for less)
o Demand for high wages are denied by employers, resulting in a low wage
and low unemployment
Highly centralized (Scandinavian) and highly decentralized (Anglo-Saxon)
countries result in low wages and low unemployment
Countries that are somewhat centralized, tend to be the courtiers with the
highest level of unemployment
“adiaia outries’ orkers dead lo ages resultig i lo
Anglo-“ao outries’ orkers dead high ages, ut get deied 
employers, resulting in low wages and low unemployment
Continental European workers demand high wages and have enough bargaining
power for firms to agree, resulting in high wages and high unemployment
3. What is the soial wage? Why was the soial wage aadoed afte the 97s?
Social wages are welfare benefits (insurance, pension, healthcare, education,
etc.) paid by the government (through tax revenue)
These social wages were offered in exchange for lower market wages
o Market wages are paid by firms, while social wages are paid by workers
through government taxes, therefore not effecting the overall
revenue/profits of employers
High social wages are only sustainable when the economy is growing, which was
not the case after the 1970s
o When economic growth is slow, taxes have to increase to be able to
afford the same generous welfare benefits
o If social wages become too expensive to maintain, it will result in a wage
restraint collapse
4. What is Bauol’s ost disease? Ca wage euality help ue the ost disease?
Service economy requires low skill, therefore if a service is too expensive, they
can simply be substituted out through self service
o Wages in the service economy are artificially raised due to higher wages
in other industries are higher, in order to maintain workers instead of
losing them to the other, higher paying sectors
o Service economy wages are raised, even though the level of productivity
is low this is ko as the Bauol’s ost disease
find more resources at
find more resources at
You're Reading a Preview

Unlock to view full version