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Technology resistance and globalisation with trade unions: the choice between employment protection and flexicurity

We analyse how different labour market institutions — employment protection versus ‘flexicurity’ — affect technology adoption in unionised firms. The analysis is cast in a setting of corporate globalisation, where domestic unionised labour face the double threat of labour-saving technological innovations and international outsourcing of domestic production. In the main part of the analysis, we analyse trade unions’ incentives to oppose or endorse the adoption of new technology. Our main result is that both weaker employment protection and a higher reservation wage for unionsed workers (interpreted as increased ‘flexicurity’) contribute to making trade unions more willing to accept labour-saving technological change. Furthermore, these effects are reinforced by globalisation. In an extension to the main analysis, we endogenise the technological progress by studying firms’ incentives to invest in new technology and find that these incentives are also generally strengthened in a labour market with more ‘flexicurity’.

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Paper provided by NIPE - Universidade do Minho in its series NIPE Working Papers with number 25/2007.

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Date of creation: 2007
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Handle: RePEc:nip:nipewp:25/2007
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  1. Kessing, Sebastian, 2002. "Employment protection and product market competition
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    ," Discussion Papers, Research Unit: Market Processes and Governance FS IV 02-31, Social Science Research Center Berlin (WZB).
  2. Lommerud, Kjell Erik & Meland, Frode & Straume, Odd Rune, 2005. "Globalization and Union Opposition to Technological Change," CEPR Discussion Papers 4836, C.E.P.R. Discussion Papers.
  3. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2006. "The Political Economy of Flexicurity," Working Papers 2006-15, FEDEA.
  4. Gerda Dewit & Dermot Leahy & Catia Montagna, 2003. "Employment Protection and Globalisation in Dynamic Oligopoly," Dundee Discussion Papers in Economics 137, Economic Studies, University of Dundee.
  5. Justus Haucap & Christian Wey, 2004. "Unionisation Structures and Innovation Incentives," Discussion Papers of DIW Berlin 398, DIW Berlin, German Institute for Economic Research.
  6. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-39, March.
  7. Acemoglu, Daron & Shimer, Robert, 2000. "Productivity gains from unemployment insurance," European Economic Review, Elsevier, vol. 44(7), pages 1195-1224, June.
  8. Jo Blanden & Stephen Machin & John Van Reenen, 2006. "Have Unions Turned the Corner? New Evidence on Recent Trends in Union Recognition in UK Firms," British Journal of Industrial Relations, London School of Economics, vol. 44(2), pages 169-190, 06.
  9. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  10. Moene, Karl Ove & Wallerstein, Michael, 1997. "Pay Inequality," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages 403-30, July.
  11. Hassler, John & Rodríguez Mora, José Vicente, 2007. "Unemployment insurance design: inducing moving and retraining," Discussion Paper Series In Economics And Econometrics 0702, Economics Division, School of Social Sciences, University of Southampton.
  12. Robert W. Staiger, 1988. "Organized Labor and the Scope of International Specialization," NBER Working Papers 2514, National Bureau of Economic Research, Inc.
  13. Andrea Ichino & Regina T. Riphahn, 2001. "The Effect of Employment Protection on Worker Effort. A Comparison of Absenteeism During and After Probation," CESifo Working Paper Series 596, CESifo Group Munich.
  14. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
  15. Calabuig, Vicente & Gonzalez-Maestre, Miguel, 2002. "Union structure and incentives for innovation," European Journal of Political Economy, Elsevier, vol. 18(1), pages 177-192, March.
  16. Dowrick, Steve & Spencer, Barbara J, 1994. "Union Attitudes to Labor-Saving Innovation: When Are Unions Luddites?," Journal of Labor Economics, University of Chicago Press, vol. 12(2), pages 316-44, April.
  17. Agell, Jonas & Lommerud, Kjell Erik, 1993. " Egalitarianism and Growth," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(4), pages 559-79, December.
  18. Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 160-93.
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