Technological Irreversibility in a Right-to-Manage Model

Jean-François Fagnart and Marc Germain
Additional contact information
Jean-François Fagnart: UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES)

No 1994022, LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: The paper focuses on the interactions between investment and non-cooperative wage bargaining when the investment decision of the firm bears irreversibly both on the size of the productive capacity and on the capital intensity of the technology used by the firm. The paper first shows how a given investment decision (i.e. the choice of a given capacity and a given technology) affects the wage bargaining solution. This solution changes of course quantitatively since the level of the bargained wage changes with the level of investment. It also changes qualitatively since the relation linking the bargained wage to a given investment decision also changes. The firm takes of course this into account when investing and identifies different (three) types of investment decisions inducing each a particular type of bargaining agreement. The paper then shows that qualitative changes may occur in the investment policy of the firm : the function describing the optimal investment decision may exhibit discontinuities with respect to the parameters describing the optimal investment decision may exhibit discontinuities with respect to the parameters describing the environment of the firm (like the bargaining power of the union, its fall back position,…). In particular, the installed capacity and the employment level are not necessarily monotonically decreasing functions of the bargaining power of the union.

Pages: 19
Date: 1994-09-01
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvir:1994022

Access Statistics for this paper

More papers in LIDAM Discussion Papers IRES from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium). Contact information at EDIRC.
Bibliographic data for series maintained by Virginie LEBLANC ().