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Union bargaining power and innovation in the presence of subcontracting

Author

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  • Hamid Beladi

    (UTSA)

  • Hamid Arijit Mukherjee

Abstract

We provide a reason for the positive relation between union bargaining power and innovation, which is empirically relevant but in contrast to the usual belief that higher union bargaining power reduces innovation under a right-to-manage model of labour union and ex-post bargaining. We show that if the final goods producer can subcontract production to the informal sector, higher union bargaining power increases innovation. We also show that while higher union bargaining power makes the final goods producer worse off irrespective of the effect of the union bargaining power on innovation, higher union bargaining power may increase (decrease) consumer surplus (union utility) by inducing innovation. Hence, a higher union bargaining power may either increase or decrease social welfare.Length: 19 pages

Suggested Citation

  • Hamid Beladi & Hamid Arijit Mukherjee, 2015. "Union bargaining power and innovation in the presence of subcontracting," Working Papers 0195eco, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0195eco
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    File URL: http://interim.business.utsa.edu/wps/eco/0012ECO-414-2015.pdf
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    References listed on IDEAS

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    Cited by:

    1. Beladi, Hamid & Mukherjee, Arijit, 2017. "Union bargaining power, subcontracting and innovation," Journal of Economic Behavior & Organization, Elsevier, vol. 137(C), pages 90-104.

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    More about this item

    Keywords

    Consumer surplus; Innovation; Union; Subcontracting;
    All these keywords.

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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