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Unionisation structures, productivity and firm performance: New insights from a heterogeneous firm model

  • Braun, Sebastian

This paper introduces collective bargaining at the firm and at the sector level into the heterogeneous firm model of Melitz and Ottaviano (Melitz, M. J., Ottaviano, G. I. P., 2008. Market size, trade, and productivity. Review of Economic Studies 75 (1), 295-316). It then analyses how the two bargaining regimes change aggregate industry productivity and firm performance relative to a competitive labour market. While sector-level bargaining forces the least productive firms to exit and thus increases average productivity relative to the competitive benchmark, firm-level bargaining allows less productive firms to stay in the market and thus reduces average productivity. Sector-level bargaining also results in higher average output and profit levels than either firm-level bargaining or a competitive labour market. The paper also shows that the choice between sector- and firm-level bargaining can involve a trade-off between product variety and product prices: Not only the average price level but also product variety tends to be lower under sector-level bargaining than under firm-level bargaining.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 18 (2011)
Issue (Month): 1 (January)
Pages: 120-129

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Handle: RePEc:eee:labeco:v:18:y:2011:i:1:p:120-129
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. Mark J. Melitz, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," NBER Working Papers 8881, National Bureau of Economic Research, Inc.
  2. Del Gatto, Massimo & Mion, Giordano & Ottaviano, Gianmarco, 2006. "Trade Integration, Firm Selection and the Costs of Non-Europe," CEPR Discussion Papers 5730, C.E.P.R. Discussion Papers.
  3. Janiak, Alexandre, 2008. "Welfare in Models of Trade with Heterogeneous Firms," IZA Discussion Papers 3803, Institute for the Study of Labor (IZA).
  4. Ulph, A. M. & Ulph, D. T., 1994. "Labour markets and innovation: Ex-post bargaining," European Economic Review, Elsevier, vol. 38(1), pages 195-210, January.
  5. Justus Haucap & Christian Wey, 2004. "Unionisation Structures and Innovation Incentives," Discussion Papers of DIW Berlin 398, DIW Berlin, German Institute for Economic Research.
  6. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2009. "Trade, wages and productivity," LSE Research Online Documents on Economics 28609, London School of Economics and Political Science, LSE Library.
    • Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2014. "Trade, Wages, And Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1305-1348, November.
  7. Eckel, Carsten & Egger, Hartmut, 2009. "Wage bargaining and multinational firms," Munich Reprints in Economics 20528, University of Munich, Department of Economics.
  8. Hibbs Jr., Douglas A. & Locking, Håkan, 2000. "Wage Dispersion and Productive Efficiency: Evidence For Sweden," Working Papers in Economics 21, University of Gothenburg, Department of Economics.
  9. Hartmut Egger & Udo Kreickemeier, . "Worker-Specific Effects of Globalisation," Discussion Papers 09/23, University of Nottingham, GEP.
  10. Hirsch, Barry, 2003. "What Do Unions Do for Economic Performance?," IZA Discussion Papers 892, Institute for the Study of Labor (IZA).
  11. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2003. "Globalisation and union opposition to technological change
    [Globalisierung und gewerkschaftlicher Widerstand gegen technologischen Wandel]
    ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-18, Social Science Research Center Berlin (WZB).
  12. Jeffrey Campbell, 2000. "Market Size Matters," Econometric Society World Congress 2000 Contributed Papers 1225, Econometric Society.
  13. Tauman, Y & Weiss, Y, 1987. "Labor Unions and the Adoption of New Technology," Journal of Labor Economics, University of Chicago Press, vol. 5(4), pages 477-501, October.
  14. Ottaviano, Gianmarco & Melitz, Marc, 2008. "Market Size, Trade, and Productivity," Scholarly Articles 3229096, Harvard University Department of Economics.
  15. Ulph, Alistair & Ulph, David, 2001. " Strategic Innovation with Complete and Incomplete Labour Market Contracts," Scandinavian Journal of Economics, Wiley Blackwell, vol. 103(2), pages 265-82, June.
  16. Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-30, July.
  17. Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-44, April.
  18. Behrens, Kristian & Murata, Yasusada, 2007. "General equilibrium models of monopolistic competition: A new approach," Journal of Economic Theory, Elsevier, vol. 136(1), pages 776-787, September.
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