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Unionisation Structures, Productivity, and Firm Performance

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  • Sebastian Braun
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    Abstract

    This paper studies how different unionisation structures affect firm productivity, firm performance, and consumer welfare in a monopolistic competition model with heterogeneous firms and free entry. While centralised bargaining induces tougher selection among hetero- geneous producers and thus increases average productivity, firm-level bargaining allows less productive entrants to remain in the market. Centralised bargaining also results in higher average output and profit levels than either decentralised bargaining or a competitive labour market. From a welfare perspective, the choice between centralised and decentralised bar- gaining involves a potential trade-off between product variety and product prices. Extending the model to a two-country setup, I furthermore show that the positive effect of centralised bargaining on average productivity can be overturned when firms face international low-wage competition.

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    File URL: http://sfb649.wiwi.hu-berlin.de/papers/pdf/SFB649DP2009-027.pdf
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    Bibliographic Info

    Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2009-027.

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    Length: 37 pages
    Date of creation: May 2009
    Date of revision:
    Handle: RePEc:hum:wpaper:sfb649dp2009-027

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    Related research

    Keywords: Trade Unions; Productivity; Firm Performance; International Competition;

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    References

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    1. Marc J. Melitz & Gianmarco I.P. Ottaviano, 2005. "Market Size, Trade, and Productivity," Development Working Papers 201, Centro Studi Luca d\'Agliano, University of Milano.
    2. Justus Haucap & Christian Wey, 2004. "Unionisation structures and innovation incentives," Economic Journal, Royal Economic Society, vol. 114(494), pages C149-C165, 03.
    3. Jeffrey R. Campbell & Hugo Hopenhayn, 2003. "Market size matters," Working Paper Series WP-03-12, Federal Reserve Bank of Chicago.
    4. Ulph, A. M. & Ulph, D. T., 1994. "Labour markets and innovation: Ex-post bargaining," European Economic Review, Elsevier, vol. 38(1), pages 195-210, January.
    5. Grout, Paul A, 1984. "Investment and Wages in the Absence of Binding Contracts: A Nash Bargining Approach," Econometrica, Econometric Society, vol. 52(2), pages 449-60, March.
    6. DEL GATTO, Massimo & MION, Giordano & OTTAVIANO, Gianmarco I.P., 2006. "Trade integration, firm selection and the costs of non-Europe," CORE Discussion Papers 2006061, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    7. Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-30, July.
    8. Barry T. Hirsch, 2004. "What Do Unions Do for Economic Performance?," Journal of Labor Research, Transaction Publishers, vol. 25(3), pages 415-456, July.
    9. Tauman, Y & Weiss, Y, 1987. "Labor Unions and the Adoption of New Technology," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 477-501, October.
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