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Employment protection versus flexicurity: on technology adoption in unionised firms

  • Lommerud, Kjell Erik
  • Straume, Odd Rune

We analyse how different labour market institutions--employment protection versus ‘flexicurity’--affect technology adoption in unionised firms. We consider trade unions’ incentives to oppose or endorse labour-saving technology and firms’ incentives to invest in such technology. Increased flexicurity--interpreted as less employment protection and a higher reservation wage for workers--unambiguously increases firms’ incentives for technology adoption. If unions have some direct influence on technology, a higher reservation wage also makes unions more willing to accept technological change. Less employment protection has the opposite effect, since this increases the downside (job losses) of labour-saving technology.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7919.

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Date of creation: Jul 2010
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Handle: RePEc:cpr:ceprdp:7919
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