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Union Wage Bargaining and the Incentive to Innovate

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  • Jörg Lingens
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    Abstract

    We analyse the influence of wage bargaining on the firm´s research incentive. In a duopoly setting, firms invest resources into a Reinganum-type patent race. The wage is bargained for with a union. Besides the holdup and the strategic effect, which have been analysed before, we are able to identify a third effect of unionisation: through the Arrow effect. This effect increases the incentive for doing research. Solving the model numerically reveals that in sum, unionisation decreases the level of research investment. This result is independent of the bargaining institution and of the degree of product heterogeneity.

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    Bibliographic Info

    Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

    Volume (Year): 165 (2009)
    Issue (Month): 2 (June)
    Pages: 260-280

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    Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200906)165:2_260:uwbati_2.0.tx_2-q

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    Cited by:
    1. Lai, Chung-Hui & Wang, Vey, 2010. "The effects of unionization in an R&D growth model with (In)determinate equilibrium," MPRA Paper 27748, University Library of Munich, Germany.

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