Price competition and the effects of labour unions on innovation

Basak, Debasmita

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 unions 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: Jun 15, 2022
• Journal: Journal of Institutional and Theoretical Economics
• Print ISSN: 0932-4569
• Electronic ISSN: 1614-0559
• Publisher: Mohr Siebeck
• 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