The effects of unions on productivity and firm performance have been the topic of extensive research. Existing studies have, however, primarily focused on firm-level bargaining and on markets that are characterised by a small and fixed number of identical firms. This paper studies how different unionisation structures affect firm productivity and firm performance in a monopolistic competition model with heterogeneous firms and free entry. While centralised bargaining induces tougher selection among heterogeneous 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 the perspective of consumers, the choice between centralised and decentralised bargaining involves a potential trade-off between product variety and product prices
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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number
1566.
Find related papers by JEL classification: J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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