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Price competition and the effects of labour union on innovation

Basak, Debasmita

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Abstract

In contrast to the conventional belief that labour union intervention reduces firms' incentives to innovate, I show that this view may not hold true when the firms compete in prices. I find that the presence of labour union may increase firms' incentives for innovation if the worker's reservation wage is high. Further, a comparison across the unionisation structures, viz., decentralised unions and centralised union reveals that whether the firms innovate more under the former union structure or the latter, depends on the holdup problem and the reservation wage of the workers.

Citation

Basak, D. (2021). Price competition and the effects of labour union on innovation. Journal of Institutional and Theoretical Economics, 177(3), 337-358. https://doi.org/10.1628/jite-2021-0009

Journal Article Type Article
Acceptance Date Apr 19, 2021
Online Publication Date Jun 14, 2021
Publication Date 2021-09
Deposit Date Apr 22, 2021
Publicly Available Date Mar 28, 2024
Journal Journal of Institutional and Theoretical Economics
Print ISSN 0932-4569
Peer Reviewed Peer Reviewed
Volume 177
Issue 3
Pages 337-358
DOI https://doi.org/10.1628/jite-2021-0009
Keywords Industry-wide union; Firm-specific union; Process Innovation; Union utility JEL Classification: D43; J51; L13; O31
Public URL https://nottingham-repository.worktribe.com/output/5487954
Publisher URL https://www.mohrsiebeck.com/artikel/price-competition-and-the-effects-of-labour-unions-on-innovation-101628jite-2021-0009?no_cache=1

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