The Impact of Organization Costs when Firm-selection Matters

Konferenzbeitrag

How does an increase in organization costs (i.e. costs which arise when labor unions organize firm's workforces) affect the industry struc-ture, wage inequality and welfare? In the present paper, we build a model with costly and endogenous unionization, heterogeneous firms as well as free market entry/exit. In such a setting, we show that the share of low-productive firms operating in the market decreases (in-creases) in organization costs if those costs are relatively low (high). If more low-productive firms are active in the market, consumption and hence welfare decline because prices are, on average, higher (vice versa). As such, an increase in organization costs and thus a decline in unionization rates could be welfare-reducing. In addition, we find a hump-shaped relationship between organization costs and wage in-equality. These results suggest that a policy aiming to reduce union-ization by an increase in organization costs can but not necessarily have to be an improvement of the economic performance.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2016: Demographischer Wandel - Session: Heterogenous Firms and the Labor Market ; No. G07-V1

Classification and Topics

• Classification: Wirtschaft ; Trade Unions: Objectives, Structure, and Effects ; Production, Pricing, and Market Structure; Size Distribution of Firms ; Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lingens, Jörg ; De Pinto, Marco ; Bauer, Christian
• Event: Veröffentlichung
• (who): ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft
• (where): Kiel und Hamburg
• (when): 2016

Further information

• Handle: http://hdl.handle.net/10419/145620
• Last update: 10.03.2025, 11:42 AM CET