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

Gabriele Cardullo, Maurizio Conti and Giovanni Sulis ()

No 12008, IZA Discussion Papers from Institute of Labor Economics (IZA)

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: hold-up; two-tier bargaining; control function; investment; unions (search for similar items in EconPapers)
JEL-codes: E22 J51 J64 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2018-11
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-dge, nep-eur, nep-lab and nep-mac
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Published - revised version published as 'A Model of Unions, Two-Tier Bargaining and Capital Investment' in: Labour Economics, 2020, 67, 101936

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Working Paper: Unions, Two-Tier Bargaining and Physical Capital Investment: Theory and Firm-Level Evidence from Italy (2018)
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