Labor Unions and the Scale and Scope of Multi-Product Firms
This paper sets up a general oligopolistic equilibrium model with multi-product firms and union wage setting in a subset of industries. By claiming a wage premium, labor unions enforce a decline in firm scale and scope and thus dampen industrial output, with negative feedback effects on the competitive wage and positive ones on firm scale and scope in non-unionized sectors. In this setting, a decline in union density raises labor demand and thus wages in non-unionized as well as unionized industries. This induces a general decline in firm scale and scope, with the respective reduction being more pronounced in non-unionized industries. Aside from analyzing the consequences of deunionization in a closed economy, we also shed light on how multi-product firms respond to a country’s movement from autarky to free trade with a symmetric partner country. Access to international trade stimulates labor demand and raises the competitive as well as the union wage, thereby lowering firm scope in all industries. Since the labor market distortion becomes less severe, unionized and non-unionized firms become more similar in the size of their product range. While scope effects are unambiguous, adjustments in firm scale turn out to be less clearcut and inter alia depend on the degree of product differentiation.
When requesting a correction, please mention this item's handle: RePEc:bav:wpaper:097_eggerkoch. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rebecca Schrader)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.