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Technology resistance and globalisation with trade unions: the choice between employment protection and flexicurity

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  • Lommerud, Kjell Erik

    ()
    (University of Bergen, Department of Economics)

  • Straume, Odd Rune

    ()
    (University of Minho, Department of Economics and NIPE)

Abstract

We analyse how different labour market institutions — employment protection versus ‘flexicurity’ — affect technology adoption in unionised firms. The analysis is cast in a setting of corporate globalisation, where domestic unionised labour face the double threat of labour-saving technological innovations and international outsourcing of domestic production. In the main part of the analysis, we analyse trade unions’ incentives to oppose or endorse the adoption of new technology. Our main result is that both weaker employment protection and a higher reservation wage for unionsed workers (interpreted as increased ‘flexicurity’) contribute to making trade unions more willing to accept labour-saving technological change. Furthermore, these effects are reinforced by globalisation. In an extension to the main analysis, we endogenise the technological progress by studying firms’ incentives to invest in new technology and find that these incentives are also generally strengthened in a labour market with more ‘flexicurity’.

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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 13/07.

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Length: 30 pages
Date of creation: 30 Oct 2007
Date of revision:
Handle: RePEc:hhs:bergec:2007_013

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Web page: http://www.uib.no/econ/en
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Keywords: Technology adoption; Globalisation; Trade unions; Employment protection; Flexicurity.;

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  1. Hassler, John & Rodríguez Mora, José V., 2008. "Unemployment insurance design: Inducing moving and retraining," European Economic Review, Elsevier, vol. 52(5), pages 757-791, July.
  2. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2012. "The Political Economy Of Flexicurity," Journal of the European Economic Association, European Economic Association, vol. 10(4), pages 684-715, 08.
  3. Sebastian Kessing, 2004. "Employment Protection And Product Market Competition," Royal Economic Society Annual Conference 2004 50, Royal Economic Society.
  4. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2003. "Globalisation and union opposition to technological change," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-18, Social Science Research Center Berlin (WZB).
  5. Acemoglu, Daron & Shimer, Robert, 2000. "Productivity gains from unemployment insurance," European Economic Review, Elsevier, vol. 44(7), pages 1195-1224, June.
  6. Agell, Jonas & Lommerud, Kjell Erik, 1993. " Egalitarianism and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 559-79, December.
  7. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  8. Ichino, Andrea & Riphahn, Regina T., 2001. "The Effect of Employment Protection on Worker Effort: A Comparison of Absenteeism During and After Probation," IZA Discussion Papers 385, Institute for the Study of Labor (IZA).
  9. Calabuig, Vicente & Gonzalez-Maestre, Miguel, 2002. "Union structure and incentives for innovation," European Journal of Political Economy, Elsevier, vol. 18(1), pages 177-192, March.
  10. Haucap, Justus & Wey, Christian, 2003. "Unionisation Structures and Innovation Incentives," Working Paper 21/2003, Helmut Schmidt University, Hamburg.
  11. Robert W. Staiger, 1988. "Organized Labor and the Scope of International Specialization," NBER Working Papers 2514, National Bureau of Economic Research, Inc.
  12. Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-44, April.
  13. Dewit, Gerda & Dermot Leahy & Catia Montagna, 2003. "Employment protection and globalisation in dynamic oligopoly," Royal Economic Society Annual Conference 2003 57, Royal Economic Society.
  14. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-39, March.
  15. Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-30, July.
  16. Jo Blanden & Stephen Machin & John Van Reenen, 2006. "Have Unions Turned the Corner? New Evidence on Recent Trends in Union Recognition in UK Firms," British Journal of Industrial Relations, London School of Economics, vol. 44(2), pages 169-190, 06.
  17. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  18. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
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