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Union bargaining power, subcontracting and innovation

Beladi, Hamid; Mukherjee, Arijit


Hamid Beladi

Professor of Industrial Economics


We show that if a firm can subcontract production to an informal sector, an increase in union power may either increase or decrease innovation. An increase in union power makes the firm worse off irrespective of its effect on innovation. However, in contrast to the usual belief, an increase in union power may increase consumer surplus and decrease union utility by affecting innovation, thus suggesting that a union may not want to be too powerful. An increase in union power may create an ambiguous effect on social welfare. Our analysis provides new insights to the relation between union power and innovation.


Beladi, H., & Mukherjee, A. (2017). Union bargaining power, subcontracting and innovation. Journal of Economic Behavior and Organization, 137, 90-104.

Journal Article Type Article
Acceptance Date Feb 17, 2017
Online Publication Date Feb 21, 2017
Publication Date 2017-05
Deposit Date Feb 22, 2017
Publicly Available Date Aug 22, 2018
Journal Journal of Economic Behavior & Organization
Print ISSN 0167-2681
Electronic ISSN 0167-2681
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 137
Pages 90-104
Keywords Consumer surplus; Innovation; Union; Subcontracting
Public URL
Publisher URL


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