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Can public policy interfere with culture, such as beliefs and norms of cooperation? The authors investigate this question by evaluating the interactions between the State and the Civil Society, focusing on the labor market. International data shows a negative correlation between union density and the quality of labor relations on one hand, and state regulation of the minimum wage on the other hand. To explain this relation, they develop a model of learning of the quality of labor relations. State regulation crowds out the possibility for workers to experiment negotiation and learn about the true cooperative nature of participants in the labor market.
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