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Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy

Gabriele Cardullo (), Maurizio Conti () and Giovanni Sulis ()

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: In this paper we present a search and matching model in which firms invest in sunk capital equipment. By comparing two wage setting scenarios, we show that a two-tier bargaining scheme, where a fraction of the salary is negotiated at firm level, raises the amount of investment per worker in the economy compared to a one-tier bargaining scheme, in which earnings are entirely negotiated at sectoral level. The model's main result is consistent with the positive correlation between investment per worker and the presence of a two-tier bargaining agreement that we find in a representative sample of Italian firms.

Keywords: unions; investment; hold-up; Two-Tier Bargaining; Control Function (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge and nep-eur
Date: 2018
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