Union bargaining power and innovation in the presence of subcontracting

Hamid Beladi and Arijit Mukherjee

Working Papers from College of Business, University of Texas at San Antonio

Abstract: We provide a reason for the positive relation between union bargaining power and innovation, which is empirically relevant but in contrast to the usual belief that higher union bargaining power reduces innovation under a right-to-manage model of labour union and ex-post bargaining. We show that if the final goods producer can subcontract production to the informal sector, higher union bargaining power increases innovation. We also show that while higher union bargaining power makes the final goods producer worse off irrespective of the effect of the union bargaining power on innovation, higher union bargaining power may increase (decrease) consumer surplus (union utility) by inducing innovation. Hence, a higher union bargaining power may either increase or decrease social welfare.Length: 19 pages

Keywords: Consumer surplus; Innovation; Union; Subcontracting (search for similar items in EconPapers)
JEL-codes: D42 J51 L12 O31 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (1)

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