Parente and Prescott's Theory May Work in Practice But Does Not Work in Theory

In this paper we challenge Parente and Prescott's (1999) theoretical framework, which establishes that unions use their control of quot;work practicesquot; 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 quot;work practicesquot; consistent with operating technology at full efficiency, in order to allow workers to enjoy more leisure. Our result is more general than Parent and Prescott's and does not rely on the particular specification of preferences