Unionization Structures and Innovation Incentives

44 Pages Posted: 25 Nov 2003

See all articles by Justus Haucap

Justus Haucap

Heinrich Heine University Dusseldorf - Department of Economics; German Institute for Economic Research (DIW Berlin)

Christian Wey

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE)

Date Written: October 2003

Abstract

This Paper examines how different unionization structures affect firms' innovation incentives and industry employment. We distinguish three modes of unionization with increasing degree of centralization: (1) 'decentralization' where wages are determined independently at the firm-level, (2) 'coordination' where one industry union sets individual wages for all firms, and (3) 'centralization' where an industry union sets a uniform wage rate for all firms. While firms' investment incentives are largest under 'centralization', investment incentives are non-monotone in the degree of centralization: 'decentralization' carries higher investment incentives than 'coordination'. Labour market policy can spur innovation by decentralizing unionization structures or through non-discrimination rules.

Keywords: Unions, innovation, centralization, hold-up

Keywords: Unions, innovation, centralization, hold-up

JEL Classification: D43, J50, L13

Suggested Citation

Haucap, Justus and Wey, Christian, Unionization Structures and Innovation Incentives (October 2003). CEPR Discussion Paper No. 4079. Available at SSRN: https://ssrn.com/abstract=472841

Justus Haucap

Heinrich Heine University Dusseldorf - Department of Economics ( email )

Duesseldorf
Germany

HOME PAGE: http://www.dice.uni-duesseldorf.de

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Christian Wey (Contact Author)

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49-211-81-15009 (Phone)
+49-211-81-15499 (Fax)

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