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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 ()
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Gabriele Cardullo: University of Genova

No 12008, IZA Discussion Papers from Institute for the Study of Labor (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: unions; investment; hold-up; two-tier bargaining; control function (search for similar items in EconPapers)
JEL-codes: J51 J64 E22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-dge, nep-eur, nep-lab and nep-mac
Date: 2018-11
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