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Unionization Structures and Firms' Incentives for Productivity Enhancing Investments

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Author Info
Justus Haucap
Christian Wey

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Abstract

This paper examines how unionization structures that differ in the degree of wage centralization affect firms' incentives to increase labor productivity. We distinguish three modes of unionization with increasing degree of centralization: (1) "Decentralization" where wages are determined independently at the firm-level, (2) "coordination" where an industry union sets individual wages for all firms at the firmlevel, and (3) "centralization" where a uniform wage rate is set for the entire industry. We show that firms' investment incentives are largest under complete centralization. However, investment incentives are non-monotone in the degree of centralization so that "decentralization" carries higher investment incentives than "coordination." Depending on the innovation outcome, workers' wage bill is maximized under "centralization" if firms' productivity differences remain small. Otherwise, workers prefer an intermediate degree of centralization, which holds innovative activity down at its lowest level. Labor market policy can spur innovation by either decentralizing unionization structures or by imposing non-discrimination rules on monopoly unions.

ZUSAMMENFASSUNG - (Gewerkschaftssysteme und die Anreize der Unternehmen zur Produktivitätssteigerung)
Diese Arbeit untersucht den Einfluß unterschiedlicher Gewerkschaftssysteme auf die Anreize von Unternehmen, ihre Arbeitsproduktivität zu erhöhen. Wir unterscheiden zwischen drei Gewerkschaftsstrukturen mit zunehmendem Zentralisierungsgrad: 1.) "Dezentrale Lohnsetzung", bei der Löhne ohne zentrale Koordination auf Unternehmensebene bestimmt werden, 2.) "koordinierte Lohnsetzung", bei der eine Industriegewerkschaft die Lohnforderungen gegenüber einzelnen Arbeitgebern koordiniert und 3.) "zentralisierte Lohnsetzung", bei der ein einheitlicher Lohnsatz für die gesamte Industrie bestimmt wird. Wir zeigen, daß die Investitionsanreize der Unternehmen bei "zentralisierter Lohnsetzung" am stärksten sind. Die Investitionsanreize sind allerdings nicht monoton im Zentralisierungsgrad: "Dezentralisierte Lohnsetzung" führt zu stärkeren Investitionsanreizen als "koordinierte Lohnsetzung". Die Lohnsumme ist in einem zentralisierten Gewerkschaftssystem maximal, solange die Innovationen hinreichend "klein" sind, so daß die Unterschiede in der Produktivität zwischen den Unternehmen gering bleiben. Bei "großen" Innovationen bevorzugen Arbeitnehmer hingegen eine "koordinierte Lohnsetzung", wodurch die Innovationstätigkeit der Unternehmen auf ihr niedrigstes Niveau gedrückt wird. Arbeitsmarktpolitik kann die Innovationsanreize entweder durch eine Dezentralisierung der Lohnsetzung oder durch Diskriminierungsverbote für Monopolgewerkschaften erhöhen.

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Publisher Info
Paper provided by Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) in its series CIG Working Papers with number FS IV 02-10.

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Length: 37 pages
Date of creation: May 2002
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Publication status: Published under the title "Unionisation Structures and Innovation Incentives" in the Economic Journal, Vol. 114(494), March 2004, pp. C149-165.
Handle: RePEc:wzb:wzebiv:fsiv02-10

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Related research
Keywords: Unions; Oligopoly; Innovation; Productivity; Wage-Setting Centralization; Labor Market Flexibility;

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Find related papers by JEL classification:
D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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References listed on IDEAS
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  1. Haucap, Justus & Wey, Christian, 2003. "Unionization Structures and Innovation Incentives," CEPR Discussion Papers 4079, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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