Working Paper: CEPR ID: DP4079
Authors: Justus Haucap; Christian Wey
Abstract: This Paper examines how different unionization structures affect firms' innovation incentives and industry employment. We distinguish three modes of unionization with increasing degree of centralization: (1) ?decentralization? where wages are determined independently at the firm-level, (2) ?coordination? where one industry union sets individual wages for all firms, and (3) ?centralization? where an industry union sets a uniform wage rate for all firms. While firms' investment incentives are largest under ?centralization?, investment incentives are non-monotone in the degree of centralization: ?decentralization? carries higher investment incentives than ?coordination?. Labour market policy can spur innovation by decentralizing unionization structures or through non-discrimination rules.
Keywords: centralization; holdup; innovation; unions
JEL Codes: D43; J50; K31; L13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| degree of wage centralization (J31) | firms' innovation incentives (O31) |
| centralization (H77) | union's holdup potential (J51) |
| union's holdup potential (J51) | firms' innovation incentives (O31) |
| coordination (P11) | firms' investment incentives (H32) |
| decentralization (H77) | firms' investment incentives (H32) |
| centralization (H77) | industry employment (L69) |
| decentralization (H77) | industry employment (L69) |