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Right-to-manage unions endogenous growth and welfare

  • Luca Gori

    ()

    (University of Pisa)

  • Luciano Fanti

    ()

    (University of Pisa)

Using the basic overlapping generations one-sector model of endogenous growth we show that unionisation of labour markets may be growth-enhancing with respect to the standard competitive equilibrium economy with full employment, provided the capital's weight in technology and the replacement rate are both high enough. Moreover, a growth-maximising value of the union''s relative wage intensity does exist. In particular, a wage-oriented rather than an employment-oriented union should be preferred as an inducement to a higher per capita income growth. Therefore, an appropriate combination of both union''s behaviour and government policies may trigger a virtuous growth mechanism. A policy implication is that the government could follow the union''s growth-maximising rule simply by choosing properly the replacement rate. Moreover, along the balanced growth path, individuals can be better off in a unionised economy with unemployment rather than in the competitive economy with full employment.

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Article provided by AccessEcon in its journal Economics Bulletin.

Volume (Year): 29 (2009)
Issue (Month): 2 ()
Pages: 903-917

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Handle: RePEc:ebl:ecbull:eb-08o40023
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