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Price competition and the effects of labour union on process innovation

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  • Debasmita Basask
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    Abstract

    We provide a new perspective to the literature on innovation in a unionised labour market by considering price competition in the product market. In contrast to the conventional wisdom, suggesting the presence of labour union reduces the incentive for innovation, we show that this view may not hold true if the ?firms compete in prices. We show that the incentive for innovation may be higher in the presence of labour unions if the goods are close substitutes. We also show that whether the incentive for innovation is higher under decentralised labour unions or under a centralised labour union may depend on product substitutability.

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    File URL: http://www.nottingham.ac.uk/economics/documents/discussion-papers/12-05.pdf
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    Bibliographic Info

    Paper provided by University of Nottingham, School of Economics in its series Discussion Papers with number 12/05.

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    Handle: RePEc:not:notecp:12/05

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    Postal: School of Economics University of Nottingham University Park Nottingham NG7 2RD
    Phone: (44) 0115 951 5620
    Fax: (0115) 951 4159
    Web page: http://www.nottingham.ac.uk/economics/
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    Related research

    Keywords: Industry-wide union; Firm-specifi?c union; Process Innovation; Union Utility JEL classification: D43; J51; L13; O31;

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    1. Salant, Stephen W & Switzer, Sheldon & Reynolds, Robert J, 1983. "Losses from Horizontal Merger: The Effects of an Exogenous Change in Industry Structure on Cournot-Nash Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 98(2), pages 185-99, May.
    2. Mukherjee, Arijit & Pennings, Enrico, 2011. "Unionization structure, licensing and innovation," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 232-241, March.
    3. Haucap, Justus & Wey, Christian, 2003. "Unionization Structures and Innovation Incentives," CEPR Discussion Papers 4079, C.E.P.R. Discussion Papers.
    4. Dhillon, Amrita & Petrakis, Emmanuel, 2002. "A generalised wage rigidity result," International Journal of Industrial Organization, Elsevier, vol. 20(3), pages 285-311, March.
    5. Munch, Jakob Roland & Skaksen, Jan Rose, 2002. " Product Market Integration and Wages in Unionized Countries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 104(2), pages 289-99, June.
    6. 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.
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