Discussion paper

DP4079 Unionization Structures and Innovation Incentives

This Paper examines how different unionization structures affect firms' innovation incentives and industry employment. We distinguish three modes of unionization with increasing degree of centralization: (1) ?decentralization? where wages are determined independently at the firm-level, (2) ?coordination? where one industry union sets individual wages for all firms, and (3) ?centralization? where an industry union sets a uniform wage rate for all firms. While firms' investment incentives are largest under ?centralization?, investment incentives are non-monotone in the degree of centralization: ?decentralization? carries higher investment incentives than ?coordination?. Labour market policy can spur innovation by decentralizing unionization structures or through non-discrimination rules.


Wey, C and J Haucap (2003), ‘DP4079 Unionization Structures and Innovation Incentives‘, CEPR Discussion Paper No. 4079. CEPR Press, Paris & London. https://cepr.org/publications/dp4079