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Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy

Author

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  • Cardullo, Gabriele

    (University of Genova)

  • Conti, Maurizio

    (University of Genoa)

  • Sulis, Giovanni

    (University of Cagliari)

Abstract

In this paper we present a search and matching model in which firms invest in sunk capital equipment. By comparing two wage setting scenarios, we show that a two-tier bargaining scheme, where a fraction of the salary is negotiated at firm level, raises the amount of investment per worker in the economy compared to a one-tier bargaining scheme, in which earnings are entirely negotiated at sectoral level. The model's main result is consistent with the positive correlation between investment per worker and the presence of a two-tier bargaining agreement that we find in a representative sample of Italian firms.

Suggested Citation

  • Cardullo, Gabriele & Conti, Maurizio & Sulis, Giovanni, 2018. "Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy," IZA Discussion Papers 12008, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp12008
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    References listed on IDEAS

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    Cited by:

    1. Thang Ngoc Bach & Canh Quang Le & Thang Van Nguyen, 2021. "Rent Sharing, Investment, and Collective Bargaining: Evidence from Employee‐Level Data in Vietnam," The Developing Economies, Institute of Developing Economies, vol. 59(1), pages 3-38, March.

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    More about this item

    Keywords

    control function; two-tier bargaining; hold-up; investment; unions;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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