Union Wage Bargaining and the Incentive to Innovate

Jörg Lingens

Journal of Institutional and Theoretical Economics (JITE), 2009, vol. 165, issue 2, 260-280

Abstract: We analyse the influence of wage bargaining on the firm´s research incentive. In a duopoly setting, firms invest resources into a Reinganum-type patent race. The wage is bargained for with a union. Besides the holdup and the strategic effect, which have been analysed before, we are able to identify a third effect of unionisation: through the Arrow effect. This effect increases the incentive for doing research. Solving the model numerically reveals that in sum, unionisation decreases the level of research investment. This result is independent of the bargaining institution and of the degree of product heterogeneity.

JEL-codes: J51 L13 O31 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (5)

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