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Unionisation Structures and Innovation Incentives

  • Justus Haucap
  • Christian Wey

This paper examines how different unionisation structures affect firms' innovation incentives and industry employment. We distinguish three modes of unionisation with increasing degree of centralisation: (1) "Decentralisation" where wages are determined independently at the firm-level, (2) "coordination" where one industry union sets individual wages for all firms, and (3) "centralisation" where an industry union sets a uniform wage rate for all firms. While firms' investment incentives are largest under "centralisation" investment incentives are non-monotone in the degree of centralisation: "Decentralisation" carries higher investment incentives than "coordination". Labour market policy can spur innovation by decentralising unionisation structures or through non-discrimination rules.

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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 398.

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Length: 28 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp398
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