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A Simple Model of Holdup, Union Voice, and Firm Investments

In: Workplace Productivity and Management Practices

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  • Fabio Berton
  • Stefano Dughera
  • Andrea Ricci

Abstract

In this chapter, we propose a theoretical assessment of the relationship between unions and investments. We develop a simple model where a firm chooses its investment level anticipating the employee's effort choice and the outcome of wage bargaining. First, and consistently with the holdup view, we find that the union's bargaining power has a negative effect on the accumulation of fixed capital. Second, we show that this negative effect is mitigated by the voice ability of unions to ease the displeasure of exerting effort. Hence, when the voice ability of unions is strong vis-à-vis their bargaining power, the holdup view does not necessarily survive, and unionized firms invest more than their nonunionized competitors.

Suggested Citation

  • Fabio Berton & Stefano Dughera & Andrea Ricci, 2021. "A Simple Model of Holdup, Union Voice, and Firm Investments," Research in Labor Economics, in: Workplace Productivity and Management Practices, volume 49, pages 67-84, Emerald Group Publishing Limited.
    • Handle: RePEc:eme:rleczz:s0147-912120210000049003
    DOI: 10.1108/S0147-912120210000049003
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    More about this item

    Keywords

    Labor unions; rent-seeking; workers' effort; firms' investments; holdup; collective voice; J51; O31; O32;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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