Kiel Working Papers, Kiel Institute for World Economics
No 1566:
Unionisation Structures and Heterogeneous Firms
Sebastian Braun
Abstract: The effects of unions on productivity and firm performance
have been the topic of extensive research. Existing studies have, however,
primarily focused on firm-level bargaining and on markets that are
characterised by a small and fixed number of identical firms. This paper
studies how different unionisation structures affect firm productivity and
firm performance in a monopolistic competition model with heterogeneous
firms and free entry. While centralised bargaining induces tougher
selection among heterogeneous producers and thus increases average
productivity, firm-level bargaining allows less productive entrants to
remain in the market. Centralised bargaining also results in higher average
output and profit levels than either decentralised bargaining or a
competitive labour market. From the perspective of consumers, the choice
between centralised and decentralised bargaining involves a potential
trade-off between product variety and product prices
Keywords: Trade unions, heterogeneous firms, productivity, firm performance; (follow links to similar papers)
JEL-Codes: J24,; J50,; D43; (follow links to similar papers)
17 pages, October 2009
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