Training and Product Quality in Unionized Oligopolies

Quaderni DSE Working Paper N° 871

16 Pages Posted: 20 Feb 2013 Last revised: 7 Mar 2013

See all articles by Emanuele Bacchiega

Emanuele Bacchiega

University of Bologna - Department of Economics

Antonio Minniti

University of Bologna

Multiple version iconThere are 2 versions of this paper

Date Written: March 6, 2013

Abstract

In this paper we analyze the private and public incentives towards skill acquisition when the skill level of workers determines the quality level of goods, and both labor and product markets are non competitive. We delve into the mechanisms that determine the equilibrium skill acquisition outcomes and show that both "pure" (training set by either firms or unions only) and "mixed" (training set by firms and unions) training scenarios may emerge at equilibrium. We show that firms have generally greater training incentives than unions, resulting in a higher product quality. In line with empirical evidence, we also find that the wage di fferential between high-skill workers and low-skill workers is lower when the training levels of the workforce are selected by unions than by firms. Finally, we analyze the optimal public training skill levels and demonstrate that both unions and fi rms under-invest in training in comparison with the social optimum. Yet, in this case the skill premium is the lowest.

Keywords: Workers' Skills, Product Quality, Unionized Oligopoly, Training

JEL Classification: L11, L13, J51

Suggested Citation

Bacchiega, Emanuele and Minniti, Antonio, Training and Product Quality in Unionized Oligopolies (March 6, 2013). Quaderni DSE Working Paper N° 871. Available at SSRN: https://ssrn.com/abstract=2220655 or http://dx.doi.org/10.2139/ssrn.2220655

Emanuele Bacchiega (Contact Author)

University of Bologna - Department of Economics ( email )

Piazza Scaravilli 2
40126 Bologna, 40125
Italy
+390512098486 (Phone)
+390512098493 (Fax)

Antonio Minniti

University of Bologna ( email )

Piazza Scaravilli 2
Bologna, 40100
Italy

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