Unionisation Structures and Firms' Incentives for Productivity Enhancing Investments
AbstractThis paper examines how unionisation structures that differ in the degree of wage centralisation affect firms' incentives to increase labour productivity. We distinguish three modes of unionisation with increasing degree of centralisation. (1) "Decentralisation" where wages are determined independently at the firm-level, (2) "coordination" where an industry union sets individual wages for all firms at the firm-level, and (3) "centralisation" where a uniform wage rate is set for the entire industry. We show that firms' investment incentives are largest under complete centralisation. However, investment incentives are non-monotone in the degree of centralisation so that "decentralization" carries higher investment incentives than "coordination." Depending on the innovation outcome, workers' wage bill is maximised under centralisation" if firms' productivity differences remain small. Otherwise, workers prefer an intermediate degree of centralisation, which holds innovative activity down at its lowest level. Labour market policy can spur innovation by either decentralising unionisation structures or by imposing non-discrimination rules on monopoly unions.
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Bibliographic InfoPaper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 102.
Date of creation: 04 Jun 2003
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unionised oligopoly; innovation; productivity; labour market institutions;
Other versions of this item:
- Justus Haucap & Christian Wey, 2002. "Unionization Structures and Firms' Incentives for Productivity Enhancing Investments," CIG Working Papers FS IV 02-10, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2003-06-16 (All new papers)
- NEP-LAB-2003-06-16 (Labour Economics)
- NEP-LAW-2003-06-16 (Law & Economics)
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