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Irrelevance of productivity difference: A case with labor union

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Author Info
Arijit Mukherjee () (University of Nottingham, UK)

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Abstract

Common wisdom suggests that firms with higher productivities earn higher profits and the higher productivities of the firms benefit consumers by increasing outputs. We show that productivity difference may not matter for outputs and profits in presence of wage bill maximizing labor unions. Our results hold under decentralized (i.e., firm specific) and centralized union-firm bargaining, for any degree of product differentiation and for any bargaining power of the firms. Hence, our results have important implications for firms’ incentives for innovation.

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File URL: http://economicsbulletin.vanderbilt.edu/2007/volume10/EB-07J50006A.pdf
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Publisher Info
Article provided by Economics Bulletin in its journal Economics Bulletin.

Volume (Year): 10 (2007)
Issue (Month): 17 ()
Pages: 1-8
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ebl:ecbull:v:10:y:2007:i:17:p:1-8

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Related research
Keywords: Labor union; Productivity difference; Wage rates; Profits;

Find related papers by JEL classification:
J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Haucap, Justus & Pauly, Uwe & Wey, Christian, 2001. "Collective wage setting when wages are generally binding An antitrust perspective," International Review of Law and Economics, Elsevier, vol. 21(3), pages 287-307, September. [Downloadable!] (restricted)
    Other versions:
  2. Justus Haucap & Christian Wey, 2004. "Unionisation Structures and Innovation Incentives," Discussion Papers of DIW Berlin 398, DIW Berlin, German Institute for Economic Research. [Downloadable!]
    Other versions:
  3. Justus Haucap & Christian Wey & Uwe Pauly, 1999. "The Incentives of Employers’ Associations to Raise Rivals’ Costs in the Presence of Collective Bargaining," CIG Working Papers FS IV 99-06, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG). [Downloadable!]
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This page was last updated on 2009-12-12.

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