Unionization structures and firms incentives for productivity enhancing investments

Arbeitspapier

This paper examines how unionization structures that differ in the degree of wage centralization affect firms' incentives to increase labor productivity. 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 an industry union sets individual wages for all firms at the firmlevel, and (3) “centralization” where a uniform wage rate is set for the entire industry. We show that firms' investment incentives are largest under complete centralization. However, investment incentives are non-monotone in the degree of centralization so that “decentralization” carries higher investment incentives than “coordination.” Depending on the innovation outcome, workers' wage bill is maximized under “centralization” if firms' productivity differences remain small. Otherwise, workers prefer an intermediate degree of centralization, which holds innovative activity down at its lowest level. Labor market policy can spur innovation by either decentralizing unionization structures or by imposing non-discrimination rules on monopoly unions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: WZB Discussion Paper ; No. FS IV 02-10

Classification and Topics

• Classification: Wirtschaft ; Market Structure, Pricing, and Design: Oligopoly and Other Forms of Market Imperfection ; Labor-Management Relations, Trade Unions, and Collective Bargaining: General ; Labor Law ; Oligopoly and Other Imperfect Markets
• Subject: Unions ; Oligopoly ; Innovation ; Productivity ; Wage-Setting Centralization ; Labor Market Flexibility

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Haucap, Justus ; Wey, Christian
• Event: Veröffentlichung
• (who): Wissenschaftszentrum Berlin für Sozialforschung (WZB)
• (where): Berlin
• (when): 2002

Further information

• Handle: http://hdl.handle.net/10419/50951
• Last update: 10.03.2025, 11:43 AM CET