Unions and Innovation: A Survey of the Theory and Empirical Evidence

60 Pages Posted: 15 Apr 2003  

Naercio Menezes-Filho

Universidade de Sao Paolo - Department of Economics; Institute for Fiscal Studies (IFS)

John Van Reenen

London School of Economics - Centre for Economic Performance (CEP); Stanford Graduate School of Business; Institute for Fiscal Studies (IFS); Centre for Economic Policy Research (CEPR)

Date Written: January 2003

Abstract

This Paper surveys the economic literature on the impact of trade unions on innovation. There are many theoretical routes through which unions may have an effect on innovation, for example through their effects on relative factor prices, profitability and their attitudes towards the introduction of new technology. Recent theoretical work has focused on the possibility that trade unions will 'hold up' firms by expropriating sunk R&D (research and development) investments through demanding higher rewards. The hold up problem may be mitigated (or exacerbated) by strategic incentives to compete in R&D races. In an attempt to resolve the theoretical ambiguity we focus on surveying recent micro-econometric results in the areas of R&D, innovation, technological diffusion and productivity growth. North American results find consistently strong and negative impacts of unions on R&D. By contrast, European studies (mainly in the UK) generally do not uncover negative effects of unions on R&D. There is no consensus of the effects of unions on our other main measures: technological diffusion, innovation or productivity growth even in the North American studies. These cross-country differences in the R&D impact of unions could represent either unsolved econometric problems or genuine institutional differences between nations in union attitudes and ability to bargain. We suspect the latter is the main reason.

Keywords: Unions, innovation, R&D, productivity growth

JEL Classification: J51, O31, O32

Suggested Citation

Menezes-Filho, Naercio and Van Reenen, John, Unions and Innovation: A Survey of the Theory and Empirical Evidence (January 2003). CEPR Discussion Paper No. 3792. Available at SSRN: https://ssrn.com/abstract=394607

Naercio Menezes-Filho

Universidade de Sao Paolo - Department of Economics ( email )

Sao Paolo, 05508-010
Brazil

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

John Michael Van Reenen (Contact Author)

London School of Economics - Centre for Economic Performance (CEP) ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6976 (Phone)
+44 20 7955 6848 (Fax)

Stanford Graduate School of Business ( email )

655 Knight Way
Stanford, CA 94305-5015
United States

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom
+44 20 7240 6740 (Phone)
+44 20 7240 6136 (Fax)

Centre for Economic Policy Research (CEPR)

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

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