Sunk capital, unions and the hold-up problem: Theory and evidence from cross-country sectoral data
Gabriele Cardullo (),
Maurizio Conti () and
Giovanni Sulis ()
European Economic Review, 2015, vol. 76, issue C, 253-274
In this paper we study the hold-up problem by considering the effect of union bargaining power on the level of investment per worker across sectors characterised by different levels of sunk capital investment. We develop a search and matching model with heterogeneous sectors and ex-post collective wage bargaining and test the predictions of the model using a difference-in-difference approach on manufacturing sector data in a set of OECD countries during the period 1980–2000. We find that union power reduces investment per worker particularly in sunk capital intensive industries. We refine our empirical analysis showing that the underlying hold-up problem is exacerbated when strikes are not regulated after a collective contract is signed and there is no arbitration, while the presence of social pacts may sustain cooperative equilibria that alleviate the hold-up problem. Our results are robust to a series of controls and possible endogeneity of union power.
Keywords: Hold-up; Unions; Sunk investments; Search and matching; Difference-in-difference (search for similar items in EconPapers)
JEL-codes: J51 J64 L60 E22 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
Working Paper: Sunk Capital, Unions and the Hold-Up Problem: Theory and Evidence from Sectoral Data (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:76:y:2015:i:c:p:253-274
Access Statistics for this article
European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer
More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().