(2004) Union-Firm Bargaining, Productivity Improvement and Endogenous Growth. LABOUR: Review of Labour Economics and Industrial Relations. Volume 18: 191-205.

Posted on by Palokangas Tapio K

Abstract. This paper presents a growth model with two sectors. In the high-tech sector, R&D increases productivity and union-firm bargaining determines wages, but in the traditional sector there are neither R&D nor labour unions. The government is able to regulate union bargaining power. The main results are as follows. Because firms try to escape wage increases through the improvement of productivity by R&D, the increase of union bargaining power boosts R&D and growth. It is welfare enhancing to strengthen (weaken) unions when the growth rate is below (above) some critical level. A specific rule is presented for when deunionization is socially desirable. DOWNLOAD