The Impact of Organization Costs when Firm-selection Matters

Jörg Lingens, Marco De Pinto and Christian Bauer

VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association

Abstract: How does an increase in organization costs (i.e. costs which arise when labor unions organize firm's workforces) affect the industry struc-ture, wage inequality and welfare? In the present paper, we build a model with costly and endogenous unionization, heterogeneous firms as well as free market entry/exit. In such a setting, we show that the share of low-productive firms operating in the market decreases (in-creases) in organization costs if those costs are relatively low (high). If more low-productive firms are active in the market, consumption and hence welfare decline because prices are, on average, higher (vice versa). As such, an increase in organization costs and thus a decline in unionization rates could be welfare-reducing. In addition, we find a hump-shaped relationship between organization costs and wage in-equality. These results suggest that a policy aiming to reduce union-ization by an increase in organization costs can but not necessarily have to be an improvement of the economic performance.

JEL-codes: J51 L11 L16 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-ent and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/145620/1/VfS_2016_pid_6525.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc16:145620

Access Statistics for this paper

More papers in VfS Annual Conference 2016 (Augsburg): Demographic Change from Verein für Socialpolitik / German Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().