IDEAS home Printed from https://ideas.repec.org/p/not/notecp/10-10.html
   My bibliography  Save this paper

Firm formation and economic growth: the effects of labour union bargaining power and of worker mobility

Author

Listed:
  • Mark Roberts

Abstract

A model is presented where economic growth is co-determined with the number of entrepreneurial firms as functions of union wage bargaining power and of inter-firm labour mobility. There is an inverse-U relationship between economic growth and the number of firms, if they are both heterogeneous and operate under decreasing returns to scale. If labour is immobile, economic growth is greatest where unions have a moderate degree of wage bargaining power, because this deters less able entrepreneurs from setting-up firms without discouraging too many of the more able ones. However, if labour is highly mobile, economic growth is greatest where union wage bargaining power is very weak - although not necessarily greater than in the immobility case - because the anticipation that workers can switch from lower to higher ability/wage firms acts as a very powerful entry deterrent for all but the highest ability entrepreneurs. Between these extremes, the model points to two empirical findings, a the positive correlation between the wage and firm-size, and, for some parameter values, a negative cross-country relationship between economic growth and income inequality, because countries with more labour mobility should have less wage inequality as well as greater allocative efficiency.

Suggested Citation

  • Mark Roberts, "undated". "Firm formation and economic growth: the effects of labour union bargaining power and of worker mobility," Discussion Papers 10/10, University of Nottingham, School of Economics.
  • Handle: RePEc:not:notecp:10/10
    as

    Download full text from publisher

    File URL: http://www.nottingham.ac.uk/economics/documents/discussion-papers/10-10.pdf
    Download Restriction: no

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:not:notecp:10/10. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/denotuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.