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Unionization Structures and Innovation Incentives

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  • Haucap, Justus
  • Wey, Christian

Abstract

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.

Suggested Citation

  • Haucap, Justus & Wey, Christian, 2003. "Unionization Structures and Innovation Incentives," CEPR Discussion Papers 4079, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:4079
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    More about this item

    Keywords

    centralization; hold-up; innovation; unions;

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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