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Unionization Structures and Innovation Incentives

  • Haucap, Justus
  • Wey, Christian

This Paper examines how different unionization structures affect firms' innovation incentives and industry employment. 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 one industry union sets individual wages for all firms, and (3) ‘centralization’ where an industry union sets a uniform wage rate for all firms. While firms' investment incentives are largest under ‘centralization’, investment incentives are non-monotone in the degree of centralization: ‘decentralization’ carries higher investment incentives than ‘coordination’. Labour market policy can spur innovation by decentralizing unionization structures or through non-discrimination rules.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4079.

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Date of creation: Oct 2003
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Handle: RePEc:cpr:ceprdp:4079
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